Question

# FUTURE VALUE OF AN ANNUITY Find the future values of these ordinary annuities. Compounding occurs once...

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%.

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

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