Question

Future value with periodic rates. Matt Johnson delivers newspapers and is putting away $30 at the end of each quarter from his paper route collections. Matt is 8 years old and will use the money when he goes to college in 10 years. What will be the value of​ Matt's account in 10 years with his quarterly payments if he is earning 7​% (APR), 9.5% (APR), or 15% (APR)?

What will be the value of​ Matt's account in 10 years with his quarterly payments if he is earning 7​% (APR)?

​$_______ (Round to the nearest​ cent.)

What will be the value of​ Matt's account in 10 years with his quarterly payments if he is earning 9.5% (APR)?

​$_______ (Round to the nearest​ cent.)

What will be the value of​ Matt's account in 10 years with his quarterly payments if he is earning 15% (APR)?

​$_______ (Round to the nearest​ cent.)

Answer 1

FVOrdinary Annuity = C*(((1 + i/(f*100))^(n*f) -1)/(i/(f*100)))

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

FV= 30*(((1+ 7/400)^(10*4)-1)/(7/400))

FV = 1717.02

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =-30

I/Y =7/4

N =10*4

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(7/(4*100),4*10,-30,,)

FVOrdinary Annuity = C*(((1 + i/(f*100))^(n*f) -1)/(i/(f*100)))

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

FV= 30*(((1+ 9.5/400)^(10*4)-1)/(9.5/400))

FV = 1966.93

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =-30

I/Y =9.5/4

N =10*4

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(9.5/(4*100),4*10,-30,,)

FVOrdinary Annuity = C*(((1 + i/(f*100))^(n*f) -1)/(i/(f*100)))

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

FV= 30*(((1+ 15/400)^(10*4)-1)/(15/400))

FV = 2688.3

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =-30

I/Y =15/4

N =10*4

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(15/(4*100),4*10,-30,,)