Question

What's the future value of a 12%, 5-year ordinary annuity that pays $400 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent.

Future Value of an Ordinary Annuity: $  

Future Value of an Annuity Due: $  

Answer 1

FVOrdinary Annuity = C*(((1 + i/100)^n -1)/(i/100))

C = Cash flow per period

i = interest rate

n = number of payments

FV= 400*(((1+ 12/100)^5-1)/(12/100))

FV = 2541.14

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =-400

I/Y =12

N =5

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(12/(100),5,-400,,)

FVAnnuity Due = c*(((1+ i/100)^n - 1)/i)*(1 + i/100)

C = Cash flow per period

i = interest rate

n = number of payments

FV= 400*(((1+ 12/100)^5-1)/(12/100))*(1+12/100)

FV = 2846.08

Using Calculator : Press buttons : "2ND"+"PMT"+"2ND"+"ENTER"+"2ND"+"CPT" then assign

PMT =-400

I/Y =12

N =5

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(12/(100),5,-400,,1)