Question

find the future value of an annuity due $5000 a year for 10 years at 12%

Answer 1

Future Value of an Annuity Due

Future Value of an Annuity Due is calculated by using the following Formula

Future Value of an Annuity Due = (1 + r) x P x [{(1+ r)ⁿ - 1} / r]

Annual Payment = $5,000 per year

Interest rate (r) = 12% per year

Number of years (n) = 10 Years

Future Value of an Annuity Due = (1 + r) x P x [{(1+ r) ⁿ - 1} / r]

= (1 + 0.12) x $5,000 x [{(1 + 0.12)¹⁰ – 1} / 0.12]

= 1.12 x $5,000 x [(3.105848 – 1) / 0.12]

= 1.12 x $5,000 x [2.105848 / 0.12]

= 1.12 x $5,000 x 17.548735

= $98,272.92

“Therefore, the Future Value of an Annuity Due = $98,272.92”