Question

5-14 Future Value of An Annuity Find the future values of these ordinary annuities. Compounding occurs one a year.

a. $400 per year for 10 years at 10%

b. $200 per year for 5 years at 5%

c. $400 per year for 5 years at 0%

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

Answer 1

5-14 Future Value of An Annuity Find the future values of these ordinary annuities. Compounding occurs one a year.

a). Calculating the Future Value of Annuity using Future Value of Ordinary annuity formula:-

Where, C= Periodic Payments = $400

r = Periodic Interest rate = 10%

n= no of periods = 10

Future Value = $6374.97

b). Calculating the Future Value of Annuity using Future Value of Ordinary annuity formula:-

Where, C= Periodic Payments = $200

r = Periodic Interest rate = 5%

n= no of periods = 5

Future Value = $1105.13

c). calculating the Future Value of annuity with 0% Interest

Future Value = C*n

Where, C= Periodic Payments = $400

n= no of periods = 5

Future Value = $2000

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

- Calculating the Future Value of Annuity using Future Value of annuity Due formula:-

Where, C= Periodic Payments = $400

r = Periodic Interest rate = 10%

n= no of periods = 10

Future Value = $7012.47

- Calculating the Future Value of Annuity using Future Value of annuity Due formula:-

Where, C= Periodic Payments = $200

r = Periodic Interest rate = 5%

n= no of periods = 5

Future Value = $1160.39

- calculating the Future Value of annuity with 0% Interest

Future Value = C*n

Where, C= Periodic Payments = $400

n= no of periods = 5

Future Value = $2000

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