31 January, 23:14

# On March 15, Year 1, Kathleen Corp. adopted a plan to accumulate \$1,000,000 by September 1, Year 5. Kathleen plans to make 4 equal annual deposits to a fund that will earn interest at 10% compounded annually. Kathleen made the first deposit on September 1, Year 1. Future value and future amount factors are as follows:Future value of \$1 at 10% for 4 periods1.46Future amount of ordinary annuity of \$1at 10% for 4 periods4.64Future amount of annuity in advance of \$1at 10% for 4 periods5.11Kathleen should make 4 annual deposits (rounded) ofA. \$250,000B. \$195,700C. \$684,930D. \$215,500

+2
1. 1 February, 00:15
0
B) \$195,700

Explanation:

Future value of \$1 at 10% for 4 periods = 1.46 Future amount of ordinary annuity of \$1 at 10% for 4 periods = 4.64 Future amount of annuity in advance of \$1 at 10% for 4 periods = 5.11

Since Kathleen Corp. is depositing the money in advance, she must use the future amount of annuity in advance = 5.11 in order to determine the future value of the 4 deposits:

\$250,000 x 5.11 = \$1,277,500

\$195,700 x 5.11 = \$1,000,027

\$684,930 x 5.11 = \$3,499,992

\$215,500 x 5.11 = \$1,101,205