Question

Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.

a. $600 per year for 10 years at 8%. $

b. $300 per year for 5 years at 4%. $

c. $600 per year for 5 years at 0%. $

d. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

Future value of $600 per year for 10 years at 8%: $

Future value of $300 per year for 5 years at 4%: $

Future value of $600 per year for 5 years at 0%: $

Answer 1

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

a.Future value=600[(1.08)^10-1]/0.08

=600*14.4865625

=$8691.94(Approx)

b.Future value=300[(1.04)^5-1]/0.04

=300*5.41632256

=$1624.9(Approx)

c.Future value=600*5

=$3000

Future value of annuity due=Future value of annuity*(1+rate)

a.Future value=8691.94*1.08

=$9387.29(Approx)

b.Future value=1624.9*1.04

=$1689.9(Approx)

c.Future value=600*5

=$3000