Question

Find the future values of these ordinary annuities. Compounding occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$1,000 per year for 10 years at 8%. ____?

$ $500 per year for 5 years at 4%. ____?

$600 per year for 5 years at 0%. ____?

Rework parts a, b, and c assuming they are annuities due.

Future value of $1,000 per year for 10 years at 8%: ____?

Future value of $500 per year for 5 years at 4%: ____?

Future value of $600 per year for 5 years at 0%: ____?

Answer 1

a.Information provided:

Annuity= $1,000

Time= 10 years

Interest rate= 8%

The future value of an ordinary annuity can be computed with the help of a financial calculator. The calculator by default is the END mode which is needed to calculate ordinary annuity values.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -1,000

N= 10

I/Y= 8

Press the CPT key and FV to calculate the future value.

The value obtained is 14,486.56.

Therefore, the future value in 10 year is $14,486.56.

b.Information provided:

Annuity= $500

Time= 5 years

Interest rate= 4%

The future value of an ordinary annuity can be computed with the help of a financial calculator. The calculator by default is the END mode which is needed to calculate ordinary annuity values.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -500

N= 5

I/Y= 4

Press the CPT key and FV to calculate the future value.

The value obtained is 2,708.16.

Therefore, the future value in 5 year is $2,708.16.

c.Information provided:

Annuity= $600

Time= 5 years

Interest rate= 0%

The future value of an ordinary annuity can be computed with the help of a financial calculator. The calculator by default is the END mode which is needed to calculate ordinary annuity values.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -600

N= 5

I/Y= 0

Press the CPT key and FV to calculate the future value.

The value obtained is 3,000.

Therefore, the future value in 5 year is $3,000.

d.Information provided:

Annuity= $1,000

Time= 10 years

Interest rate= 8%

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -1,000

N= 10

I/Y= 8

Press the CPT key and FV to calculate the future value.

The value obtained is 15,645.49.

Therefore, the future value in 10 year is $15,645.49.

e.Information provided:

Annuity= $500

Time= 5 years

Interest rate= 4%

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -500

N= 5

I/Y= 4

Press the CPT key and FV to calculate the future value.

The value obtained is 2,816.49.

Therefore, the future value in 5 year is $2,816.49.

f.Information provided:

Annuity= $600

Time= 5 years

Interest rate= 0%

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -600

N= 5

I/Y= 0

Press the CPT key and FV to calculate the future value.

The value obtained is 3,000.

Therefore, the future value in 5 year is $3,000.