An annuity pays 3 at the beginning of each 3 year period for 30 years. Find...

An annuity pays 3 at the beginning of each 3 year period for 30 years. Find the accumulated value of the annuity just after the final payment, using i (2) = 0.06.

Expert Solution

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Payments at the beginning of each period.

Formula: The Future Value of an annuity due (FV)

FV= {C× {[(1+r)^n]-1}/r} x (1+r)

FV = Future value (The cummulative amount available)

C= Periodic cash out flow. $3

r =effective interest rate for the period. ((1+(0.06/2))^2-1) = 6.09%

For 3 years it is (1.0609)^3-1 = 19.40%

n = number of periods. 30/3 = 10

(Each period is 3 years)

FV= {3× {[(1+0.1940)^10]-1}/0.1940} x (1+0.1940)

FV = $90.30

Answer: The accumulated value of the annuity just after the final payment is $90.30

jeff jeffy answered 2 years ago

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