Question

In: Finance

If you invest $8,600 per period for the following number of periods, how much would you...

If you invest $8,600 per period for the following number of periods, how much would you have in each of the following instances? Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods.


a. In 13 years at 6 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. In 30 years at 12 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Solutions

Expert Solution

We know that the formula for future value of annuity is as follows.

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

Where P = Equalised annual payment

n = number of periods

r = rate on interest

A) Given Time period = 13 Years, Annual interest = 6% and Annual installments = $8,600

Future value of annuity is 8600 * ((1.06)13-1)/0.06 = $162386.38

B) Given Time period = 30 Years, Annual interest = 12% and Annual installment = $8600

Future value of annuity is 8600*((1.12)30-1)/0.12 = $2075461.09


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