Asked by Carter Brown on Jul 12, 2024

verifed

Verified

Kevin Nathan will deposit $1, 000 into a special account each year beginning December 31, 2010, with the last deposit being made on December 31, 2014.Kevin wants to know how much will be in his account on December 31, 2014, immediately after the final deposit, if the account earns 12% compounded annually.To solve the problem, Kevin must find the

A) future value of a single sum
B) future value of a deferred annuity
C) future value of an ordinary annuity
D) future value of an annuity due

Future Value

The value of an investment at a specific date in the future, calculated by applying expected rates of return.

Ordinary Annuity

A series of equal payments or receipts that occur at the end of each period for a fixed duration.

Compounded Annually

Describes the method by which the interest earned on an investment is calculated and added to the principal balance once per year, leading to an increase in the amount of future interest.

  • Evaluate the future value of annuities by leveraging the frameworks of ordinary annuity and annuity due.
verifed

Verified Answer

AA
Ariadna AyalaJul 16, 2024
Final Answer :
C
Explanation :
Kevin is depositing a fixed amount each year into the account, which is a series of payments known as an ordinary annuity. He wants to know the future value of this annuity on a specified date, which is the amount that will be in the account on December 31, 2014, immediately after the final deposit. Therefore, choice C, which is the future value of an ordinary annuity, is the best option for solving this problem.