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4. Jack Soothe invests $850 semiannually at 10% for 9 years at the beginning of each...

4. Jack Soothe invests $850 semiannually at 10% for 9 years at the beginning of each year. What will be the cash value of this annuity due at the end of the ninth year?

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Answer #1

Information provided:

Semi-annual investment= $850

Time= 9 years*2= 18 semi-annual periods

Interest rate= 10%/2= 5% per semi-annual period

The question pertains to finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This is solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode.  Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2ndBGN 2ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calcualtor in BGN mode to compute the future value of an annuity due:

PMT= 850

N= 18

I/Y= 5

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

The value obtained is 25,108.15.

Therefore, the value of the annuity due is $25,108.15.

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