This Problem Demonstrates the Dependence of the Future Value of an Annuity

question 13

Essay

This problem demonstrates the dependence of the future value of an annuity on the interest rate. Suppose $1,000 is invested at the end of each year for 20 years. Calculate the future value if the investments earn an annually compounded rate of return of:
a) 5% b) 6% c) 7% d) 8%
Note that the future value increases proportionately more than the interest rate.

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