Cody invests $1,800 per year from his summer wages at a 4% annual interest rate.He plans to take a European vacation at the end of 4 years when he graduates from college.How much will he have available to spend on his vacation? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

A) $7,787.52
B) $7,488.00
C) $6,912.00
D) $7,200.00
E) $7,643.70

Question

Cody invests $1,800 per year from his summer wages at a 4% annual interest rate.He plans to take a European vacation at the end of 4 years when he graduates from college.How much will he have available to spend on his vacation? (PV of $1,FV of $1,PVA of $1,and FVA of $1)

\bold{\text{(Use appropriate factor(s) from the tables provided.) }}

A) $7,787.52
B) $7,488.00
C) $6,912.00
D) $7,200.00
E) $7,643.70

Yazir Siddiqui · Accepted Answer

Final Answer : E, Explanation :  Cody is making a series of equal annual investments, so this is an example of calculating the future value of an annuity. Using the Future Value of an Annuity (FVA) formula or table for 4 years at 4% interest, the factor is approximately 4.2464. Multiplying this factor by the annual investment amount ($1,800) gives the total amount available for his vacation: $1,800 * 4.2464 = $7,643.52 (rounded to $7,643.70 for the purpose of matching the provided options).

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