What is the future value of $3,400 per year for 22 years at an interest rate of 7.35 percent?

Multiple Choice

$167,952.98

$166,412.68

$158,874.06

$166,388.20

$173,951.30

To find the future value (FV) of an annual cash flow (annuity), we can use the future value of an ordinary annuity formula:

\[
FV = P \times \frac{(1 + r)^n - 1}{r}
\]

Where:
- $P$ is the annual payment (in this case, $P = 3400$),
- $r$ is the interest rate per period (in this case, $r = 7.35\% = 0.0735$),
- $n$ is the number of periods (in this case, $n = 22$).

Let's calculate the future value using this formula.The future value of receiving $3,400 per year for 22 years at an interest rate of 7.35% is approximately **$173,951.30**.

Thus, the correct answer is:
- **$173,951.30**.

Would you like any further details on the calculation or explanation?

Here are 5 related questions you might find useful:
1. What is the present value of the same annuity?
2. How does changing the interest rate affect the future value?
3. What would the future value be for a different number of years, say 25 years?
4. How do you calculate the future value for a non-constant interest rate?
5. How is future value affected by different compounding frequencies (e.g., quarterly)?

**Tip:** The future value of an annuity grows exponentially with both the interest rate and the number of periods due to compounding.

What is the future value of $3,400 per year for 22 years at an interest rate of 7.35 percent?

Learn how to calculate the future value of receiving $3,400 annually for 22 years at an interest rate of 7.35%. This problem uses the future value of an ordinary annuity formula and covers key financial concepts like annuities and compound interest. Suitable for students in Grades 10-12.

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