Question

Leila is planning for retirement. She deposits $650 at the end of each year in an...

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.

$

Homework Answers

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
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