Asked by Damon

The following table list two investment plans, A and B. Given this information, determine which investment is an ordinary annuity and the future value of the ordinary annuity after one year, given that both investments, A and B, compound interest monthly at the rate of 3.5%. Round to the nearest cent.
A 13-column table with 2 rows. Column 1 has entries A, B. Column 2 is labeled January with entries 350, blank. Column 3 is labeled February with entries 350, 350. Column 4 is labeled March with entries 350, 350. Column 5 is labeled April with entries 350, 350. Column 6 is labeled May with entries 350, 350. Column 7 is labeled June with entries 350, 350. Column 8 is labeled July with entries 350, 350. Column 9 is labeled August with entries 350, 350. Column 10 is labeled September with entries 350, 350. Column 11 is labeled October with entries 350, 350. Column 12 is labeled November with entries 350, 350. Column 13 is labeled December with entries blank, 350.
a.
Investment A is an ordinary annuity with $3,918.03 in the account after 1 year.
b.
Investment B is an ordinary annuity with $3,918.03 in the account after 1 year.
c.
Investment A is an ordinary annuity with $3,906.64 in the account after 1 year.
d.
Investment B is an ordinary annuity with $3,906.64 in the account after 1 year

All Answers 1

Answered by GPT-5 mini AI
Answer: (d).

Reason: An ordinary annuity has payments at the ends of the periods. Plan B makes payments in February–December (ends of months) while A makes them earlier (January–November), so B is the ordinary annuity.

Compute FV for B:
monthly rate i = 0.035/12 = 0.0029166666667, number of payments n = 11,
FV = 350 * [((1 + i)^n − 1)/i]
(1 + i)^11 ≈ 1.03255533 so factor ≈ ((1.03255533 − 1)/0.002916666667) ≈ 11.161827
FV ≈ 350 * 11.161827 ≈ $3,906.64.

Thus Investment B is the ordinary annuity and its future value after one year is $3,906.64.