Question

Leila is planning for retirement. She deposits

$650

at the end of each year in an ordinary annuity that pays

4%

interest, compounded annually.

Answer each part. Do not round any intermediate computations nor answers. If necessary, refer to the

list of financial formulas

.

(a)Find the total value of the annuity at the end of the 1st year. $ (b)Find the total value of the annuity at the end of the 2nd year. $ (c)Find the total value of the annuity at the end of the 3rd year. $

Answer 1

1

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

C = Cash flow per period

i = interest rate

n = number of payments

FV= 650*(((1+ 4/100)^1-1)/(4/100))

FV = 650

2

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

C = Cash flow per period

i = interest rate

n = number of payments

FV= 650*(((1+ 4/100)^2-1)/(4/100))

FV = 1326

3

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

C = Cash flow per period

i = interest rate

n = number of payments

FV= 650*(((1+ 4/100)^3-1)/(4/100))

FV = 2029.04