Question

what is the future value and present value of an ordinary annuity of 120$ deposited at the end of each month for 36 months into an account paying 12% per year compounded monthly?

Answer 1

a.	Future value		$ 5,169.23
Working;
	Future value of annuity of 1	=	(((1+i)^n)-1)/i		Where,
		=	(((1+0.01)^36)-1)/0.01		i	=	12%/12	=	0.01
		=	43.076878		n			=	36
	Future value of cash flow	=	Monthly Cash flow	*	Future value of annuity of 1
		=	$           120	*	43.07688
		=	$ 5,169.23
b.	Present value		$ 3,612.90
Working;
	Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
		=	(1-(1+0.01)^-36)/0.01		i	=	12%/12	=	0.01
		=	30.107505		n			=	36
	Present value of cash flow	=	Monthly Cash flow	*	Future value of annuity of 1
		=	$           120	*	30.10751
		=	$ 3,612.90