Question

In: Finance

You make deposits of $400 at the beginning of every month, into an account paying 8%...

You make deposits of $400 at the beginning of every month, into an account paying 8% interest compounded monthly. The value at the end of 15 years is:

a.136,338

b.137,338

c.138,338

d.139,338

Solutions

Expert Solution

Information provided:

Monthly deposit= $400

Time= 15 years*12= 180 months

Interest arte= 8%/12= 0.67%

The question is concerning finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

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 2nd BGN 2nd SET on the Texas BA II Plus calculator.

The below has to be entered in a financial calculator to compute the future value of the annuity payments:

PMT= 400

N= 180

I/Y= 0.67

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

The value obtained is 139,338.06.

Therefore, the future value at the end of 15 years is $139,338.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.

jeff jeffy answered 1 year ago
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