Question

​(Compound annuity​)

What is the accumulated sum of each of the following streams of​ payments?

a. ​$500 a year for 10 years compounded annually at 5 percent.

b. ​$100 a year for 5 years compounded annually at 10 percent.

c. ​$35 a year for 7 years compounded annually at 7 percent.

d. ​$25 a year for 3 years compounded annually at 2 percent.

a. What is the accumulated sum of ​$500 a year for 10 years compounded annually at 5 ​percent? ​$6,288    ​

(Round to the nearest​ cent.)

Answer 1

a. Future Value of Annuity= Principal [{(1+rate)^time period}-1]/rate

= $ 500 * [ {( 1+ 5/100)^ 10 }- 1 ] / 5%

= $ 6,288.95

Hence the correct answer is $ 6,288.95

b.

Future Value of Annuity= Principal [{(1+rate)^time period}-1]/rate

= $ 100 * [ {( 1+ 10/100)^ 5 }- 1 ] /10%

= $ 610.51

Hence the correct answer is $ 610.51

c.

Future Value of Annuity= Principal [{(1+rate)^time period}-1]/rate

= $ 35* [ {( 1+ 7/100)^ 7 }- 1 ] /7%

= $ 302.89

Hence the correct answer is $ 302.89

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d.

Future Value of Annuity= Principal [{(1+rate)^time period}-1]/rate

= $ 25* [ {( 1+ 2/100)^ 3 }- 1 ] /2%

= $ 76.51

Hence the correct answer is $ 76.51

answered by: anonymous