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Mr. Blochirt is creating a college investment fund for his daughter. He will put in $1,000 per year for the next 5 years starting one year from now and expects to earn a 6% annual rate of return. How much money will his daughter have when she starts college?(A) $5,637(B) $5,000(C) $4,212(D) $12,263

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TomShelby

Answer:

(A) $5,637

Explanation:

We need to solve for the future value of an ordinary annuity

[tex]C \times \frac{(1+r)^{time} -1}{rate} = FV\\[/tex]

C 1,000

time 5

rate 0.06

[tex]1000 \times \frac{(1+0.06)^{5} -1}{0.06} = FV\\[/tex]

FV $5,637.0930

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