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Calculate the accumulated value of an annuity immediate that pays 1000 at the end of each...

Calculate the accumulated value of an annuity immediate that pays 1000 at the end of each quarter for 20 years. The interest rate is 7% compounded quarterly.

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Answer #1

Future value of Annuity formula:

FV of Annuity = P [( (1+r)n - 1) / r]

Where P = Cash flow payment, r = rate of interest, n = number of periods

Given: P = $1000, mode = quarterly, r: 7%/4 = 1.75%, n: 20 *4 = 80 periods

Note: As the interest rate compounds quarterly so it will be divided by 4 and number of years will be multiplied by 4 to get the number of periods.

Putting all the values in the formula, we get:

FV of Annuity = 1000 [( (1+.0175)80 - 1) / .0175]

FV of Annuity = $171793.82

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