Question

FUTURE VALUE OF AN ANNUITY

Find the future values of these ordinary annuities. Compounding occurs once a year. Round your answers to the nearest cent.

1. $700 per year for 8 years at 12%.

   $  

2. $350 per year for 4 years at 6%.

   $  

3. $700 per year for 10 years at 0%.

   $  

   Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.

4. $700 per year for 8 years at 12%.

   $  

5. $350 per year for 4 years at 6%.

   $  

6. $700 per year for 10 years at 0%.

Answer 1

Future value of annuity = payment per period * [(1+i)^n-1]/i

i = interest rate per period

n = number of periods

a)

future value = 700 * [(1+0.12)^8 - 1]/0.12

= 8609.79

b)

future value = 350 * [(1+0.06)^4 - 1]/0.06

= 1531.12

c)

future value = 700 * 10 = 7000

Future value of annuity due= payment per period * [(1+i)^n-1]/i *(1+i)

i = interest rate per period

n = number of periods

d)

future value = 700 * [(1+0.12)^8 - 1]/0.12 * (1+0.12)

= 9642.96

e)

future value = 350 * [(1+0.06)^4 - 1]/0.06 * (1+0.06)

= 1622.98

f)

future value = 700 * 10 = 7000