Question

If you start making $240 monthly contributions today and continue them for five years, what’s their future value if the compounding rate is 9.00 percent APR? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

What is the present value of this annuity? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

1.Future value

Monthly payments= $240

Time= 5 years*12= 60 months

Yield to maturity= 9%/12= 0.75

Future value can be calculated using a financial calculator. The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

Enter the following into the financial calculator:

PMT= 240; N= 60; I/Y= 0.75

Press CPT and FV to calculate the future value,

The future value is $18,237.56.

2.Present value

Enter the following into the financial calculator that is in the beginning mode:

PMT= 240; N= 60; I/Y= 0.75

Press CPT and PV to calculate the future value,

The present value is $11,648.32.