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You would like to travel in South America 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

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Answer: $18,368.74

Explanation: Future value of annuity refers to the total amount a series of deposit will amount to over a certain period given a certain rate.

Periodic value (P) =$3,100

Rate(r) = 8.5% = 0.085

Time(n) = 5years

FV = Future Value of annuity =?

FV = P[ (((1+r)^n) - 1) ÷ r ]

FV =3,100[(((1+0.085)^3) - 1) ÷ 0.085]

FV = 3100[((1.085^5) - 1) ÷ 0.085]

FV = 3100[(1.50366 - 1) ÷ 0.085]

FV = 3100[0.50366 ÷ 0.085]

FV = 3100[5.9254]

FV = $18,368.74

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