You expect to retire in 40 years and save $5,000 at the end of each year until then

Finance Dec 24, 2020

You expect to retire in 40 years and save $5,000 at the end of each year until then. Which formula would use you to determine how much will you have at retirement if your investments return 8% compounded annually?

A) FV of a lump-sum

B) PV of a lump-sum

C) FVAordinary annuity

D) FVAannuity due

Expert Solution

When a person invests a fixed sum of money over fixed intervals, it is called an annuity

When the investment is made at the end of the period, it is termed as an ordinary annuity

Since we are concerned with knowing the future value of the account we would use the future value compounding factor

Correct choice C

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