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If the PV of an ordinary four year annuity is $1000 with an interest rate of...

If the PV of an ordinary four year annuity is $1000 with an interest rate of 6%, what is the FV if were an annuity due instead?

Expert Solution

The present value of the ordinary Annuity formula is,

[ Where, PV = Present value, i = Interest Rate, n = No. of Years ]

In the question, PV is given. PV = 1000, n = 4, i = 6%

We need to calculate " C "

So,

So, From this, we have calculated that Cash Flow per period is 288.46

Now, we have to calculate the future value of the annuity,

So, Future Value (FV) of annuity due is $1262.

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Hope it helps :)

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jeff jeffy answered 1 month ago

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