Question

Use Table 12-1 to calculate the future value (in $) of the annuity due. (Round your answer to the nearest cent.) Annuity Payment Payment Frequency Time Period (years) Nominal Rate (%) Interest Compounded Future Value of the Annuity $90 every month

Annuity
PaymentPayment
FrequencyTime
Period (years)Nominal
Rate (%)Interest
CompoundedFuture Value
of the Annuity$90 every month for payment every month for 1.5 years at 6% interest compounded monthly = future value of the annuity

Answer 1

Here we will use the future value of annuity due formula as per below:

FVAD = (1 + r) * P * ((1 + r)n  - 1 / r)

where, FVAD is future value of annuity due, P is the periodical amount = $90, r is the rate of interest = 6% compounded monthly, so mnthly rate = 0.5% and n is the time period = 1.5 * 12 = 18 months

Now, putting these values in the above formula, we get,

FVAD = (1 + 0.5%) * $90 * ((1 + 0.5%)18 - 1 / 0.5%)

FVAD = (1 + 0.005) * $90 * ((1 + 0.005)18 - 1 / 0.005)

FVAD = (1.005) * $90 * ((1.005)18 - 1 / 0.005)

FVAD = (1.005) * $90 * ((1.09392893957 - 1) / 0.005)

FVAD = (1.005) * $90 * (0.09392893957 / 0.005)

FVAD = (1.005) * $90 * 18.7857879135

FVAD = $1699.17

So, future value of annuity due is $1699.17