Question

In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period.

Find the accumulated amount of the annuity. (Round your answer to the nearest cent.)

$2000 monthly at 4.8% for 20 years.

Answer 1

Information provided:

Monthly payment= $2,000

Time= 20 years*12 = 240 months

Monthly interest rate= 4.8%/12 = 0.40%

The question is solved by calculating the future value of ordinary annuity.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -2,000

N= 120

I/Y= 0.40

Press the CPT key and FV to compute the future value of ordinary annuity.

The value obtained is 803,350.07.

Therefore, the accumulated value of the annuity is $803,350.07.

In case of any query, kindly comment on the solution.