Question

Joyce Keegan has decided to invest $500 quarterly for 5 years in an ordinary annuity at 12%. As her financial adviser, calculate the total cash value of the annuity at the end of year 5 for Joyce.

Answer 1

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formule for finding future Value of annuity : Evan = R (1+i)" O where R is the periodic payment - n is the number of payment period i = r which is the interest rate akuded by no. of compounding per year. R = $500 ; n = 4x5 = 20 i = 12 = 3% EVAN = 500 (1+ 12 %) 0 - u = 500 (1.03 ) 'o 1 .03 - 5000 = $13435 0.8061 0.03 Please note that the interest compounbedis assumed to be quarterly ... 1.12 - 3%. If the interest compounding is annually fuke i= 12% u