An annuity account earns monthly payments and has an annual interest rate of 4 percent. What value of r must be substituted into the formula to calculate the future value of the annuity? Round the value to the nearest thousandth. (1 point)
The formula to calculate the future value of an annuity is:
FV = Pmt * ((1 + r)^n - 1) / r
where:
FV = Future value of the annuity
Pmt = Monthly payment
r = Interest rate per period
n = Number of periods
In this case, the annual interest rate is 4 percent, so we need to find the monthly interest rate by dividing the annual interest rate by 12 (since there are 12 months in a year):
r = 4% / 12 = 0.04 / 12 = 0.0033333
Rounded to the nearest thousandth, the value of r that must be substituted into the formula is 0.003.