In: Finance
The future value of an annuity question:
1.a) Olana has been investing $7,000 at the end of each year for the past 10 years in a growth mutual fund. How much is the fund worth now assuming he has earned 11.6% compounded annually on his investment?
b) Amen has been investing $2,600 at the end of each year for the past 30 years in a growth mutual fund. How much is the fund worth now assuming he has earned 14% compounded annually on his investment?
Ans 1a) $ 120489.97
P = | Periodic payments |
r = | rate of interest |
n = | no of years |
Future Value of Annuity = | P ( (1 + r)^n - 1 ) / r |
7000* ((1 + 11.6%)^10 - 1) / (11.6%) | |
120489.97 | |
Ans 1b) $ 927645.80
Future Value of Annuity = | P ( (1 + r)^n - 1 ) / r |
2600* ((1 + 14%)^30 - 1) / (14%) | |
927645.80 | |