Question

Problem 5.14 (Future Value of an Annuity)

Find the future values of these ordinary annuities. Compounding occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$500 per year for 6 years at 12%.

$250 per year for 3 years at 6%.

$200 per year for 2 years at 0%.

Rework parts a, b, and c assuming they are annuities due.

Future value of $500 per year for 6 years at 12%: $  

Future value of $250 per year for 3 years at 6%: $  

Future value of $200 per year for 2 years at 0%: $

Answer 1

Future value of ordinary annuity = Amount*[{(1+r)ⁿ – 1}/r]

$500 per year for 6 years at 12%.

= 500*[{(1+0.12)⁶-1}/0.12]

= $4,057.59

$250 per year for 3 years at 6%

= 250*[{(1+0.06)³-1}/0.06]

= $795.9

$200 per year for 2 years at 0%

= 200*2 (since no interest)

= $400

Future value of annuity due = (1+r)*Amount*[{(1+r)ⁿ – 1}/r]

$500 per year for 6 years at 12% = 1.12*4,057.59

= $4,544.50

$250 per year for 3 years at 6%

= 1.06*795.9

= $843.65

$200 per year for 2 years at 0% = $400

Since no interest