Question

Future Value of an Annuity for Various Compounding Periods Find the future values of the following ordinary annuities. FV of $400 each 6 months for 10 years at a nominal rate of 16%, compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.

FV of $200 each 3 months for 10 years at a nominal rate of 16%, compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent. $

Answer 1

1.Information provided:

Annuity= $400

Time= 10 years*2= 20 semi-annual periods

Interest rate= 16%/2= 8% per semi-annual period

The question is solved by calculating the future value of ordinary annuity.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -400

N= 20

I/Y= 8

Press the CPT key and FV to compute the future value of ordinary annuity.

The value obtained is 18,304.79.

Therefore, the future value of ordinary annuity is $18,304.79.

2.Information provided:

Annuity= $200

Time= 10 years*4= 40 quarters

Interest rate= 16%/4= 4% per quarter

The question is solved by calculating the future value of ordinary annuity.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -200

N= 40

I/Y= 4

Press the CPT key and FV to compute the future value of ordinary annuity.

The value obtained is 19,005.10.

Therefore, the future value of ordinary annuity is $19,005.10.

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