a. 1 year

b. 3 years

c. 5 years

d. 7 years

b. 3 years

c. 5 years

d. 7 years

**Answer: b. 3 years**

**Explanation:**

Based on the future value of $3,246 and the annual payment of $1,000, one can guess that the number of payments (years) till the future value is reached will be 3 years.

Plug 3 years in to find out if you are right;

= Annuity * (( (1 + r)^n - 1) / r)

= 1,000 * (( ( 1 + 8%)³ - 1) / 8%)

= $3,246

*Answer is proven to be 3 years. *

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