Question

Find the future value of an ordinary annuity of $7,000 paid quarterly for 4 years, if the interest rate is 8%, compounded quarterly. (Round your answer to the nearest cent.)

Answer #1

**Future Value of an Ordinary
annuity**

Here, we’ve quarterly payment (P) = $7,000 per quarter

Quarterly interest rate (r) = 2.00% per quarter [8.00% / 4 quarters]

Number of periods (n) = 16 quarters [4 Years x 4 quarters]

Therefore, Future Value of an
Ordinary Annuity = P x [{(1+ r)^{n} - 1} / r ]

= $7,000 x [{(1 + 0.02)^{16}
- 1} / 0.02]

= $7,000 x [(1.372785705 – 1) / 0.02]

= $7,000 x [0.372785705 / 0.02]

= $7,000 x 18.63928525

= $130,475.00

**“Hence, the Future Value of
an Ordinary annuity will be $130,475.00 “**

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