Question

a. Find the future value of the ordinary annuity. (Round your answer to the nearest cent.) $120 monthly payment, 5.5% interest, 1 year

b. Find the future value (FV) of the annuity due. (Round your answer to the nearest cent.) $170 monthly payment, 6% interest, 14 years

Answer 1

Answer a)

Future Value =

where r is the rate of Return for compounding period = 5.5% /12 = 0.45833333333%

n is the no of compounding period 12 months

=

= 120 * 12.3071695267

= $1,476.86

Answer b)

Future Value =

where r is the rate of Return for compounding period = 6% /12 = 0.5%

n is the no of compounding period 14 years *12 months = 168 months

=

=

= 170 * 263.616289894

= $ 44,814.77