Question

Calculate the future value of an​ annuity, with case A being an ordinary annuity and case B being an annuity due.  

Case	Annuity	Interest Rate​ (%)	Deposit Period​ (Yrs)	Future Value​ ($)
A	19,000	5	8
B	9,000	9	10

Case

Annuity

Interest Rate​ (%)

Deposit Period​ (Yrs)

Future Value​

Answer 1

Case A

Information provided:

Annuity= $19,000

Interest rate= 5%

Time= 8 years

Ordinary annuity refers to the annuity that occurs at the end of a period. Ordinary annuity is solved with the calculator in the default END mode.

It is calculated by entering the below in a financial calculator:

PMT= 19,000

I/Y= 5

N= 8

Press the CPT key and FV to calculate the future value of the ordinary annuity.

The value obtained is 181,433.07.

Therefore, the value of ordinary annuity is $181,433.07.

Case B

Information provided:

Annuity= $9,000

Interest rate= 9%

Time= 10 years

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

It is calculated by entering the below in a financial calculator:

PMT= 9,000

I/Y= 9

N= 10

Press the CPT key and FV to calculate the future value of the annuity due.

The value obtained is 149,042.64.

Therefore, the value of annuity due is $149,042.64.

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