11. Choose the best answer Calculate the future value of a 5-payment “due” annuity of 1,000...

11. Choose the best answer

Calculate the future value of a 5-payment “due” annuity of 1,000 if the interest rate is 5%

Due: 1st- 5th 1000

Possible Answers:

$ 9,525.63

$ 7,525.63

$ 5,525.63

$ 6,525.63

Expert Solution

FV of annuity	=	P * [ (1+r)^{^n} -1 ]/ r

Periodic payment	P=	$ 1,000.00

rate of interest per period	r=
Rate of interest per year		5.0000%

Payment frequency		Once in 12 months
Number of payments in a year		1.00
rate of interest per period		0.05*12/12	5.0000%

Number of periods
Number of years		5
Number of payments in a year		1
Total number of periods	n=	5

FV of annuity	=	1000* [ (1+0.05)^5 -1]/0.05

FV of annuity	=	5,525.63

Answer is:

5,525.63

jeff jeffy answered 3 years ago

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