Question

Calculate the future value of an annuity, with Case A being an ordinary annuity and Case B being and annuity due. Case A - Annuity 17,000, Interest Rate 3%, Deposit Period 9, Case B - Annuity 1,000, Interest Rate 7%, Deposit Period 11.

Answer 1

What is an annuity?

Annuiy is the insurance contracts that promiste to pay lumpsum payment of series in the way of income immediately or in the future. These are fixed, variable and indexed. Annuities are calculated in the presence of present value and future value of an annuity.

Future value of an annuity?

It is the total value of annuity paid at a specific poin in the future. This can describe the value will be worth in the future for which rate not get changed.

Future value of ordinary annuity =

Future Value of Annuity due =

C = Cash flow per period, i = interest rate, n = number of payments

Answer Case A :

So, to calculate future annuity of an ordinary value we have cash flow 17,000, interest equals to 3% and number of payments period is 9.

= 1000 * (0.304773)/0.03

= 1000 * 10.15911

= 172704.8

So, to calculate future annuity of an annuity due we have cash flow 1,000, interest equals to 7% and number of payments period is .

= 1000 * 15.7836 * 1.07

= 16,888.45

Annuity due values not shown properly a mentioned below