Question

What is the approximate future value of $1,000 compounded at 10% interest (end of period) over a three-year period

Answer 1

The future value for annuity is $3030.

What is future value of an annuity?

The worth of a series of recurrent payments at a specific future date, assuming a specific rate of return, and discount rate, is the future value of the annuity. The future value of the annuity increases with the discount rate.

Some key features of future value of annuity are-

• A approach to determine how much money a stream of payments will be worth at some future date is to determine future value of an annuity.
• A present value of an annuity, on the other hand, calculates how much cash will be needed to provide a series of future payments.
• Payments are made in a typical annuity at the conclusion of each predetermined time frame.
• Payments are made at the start of each period in an annuity payable.

The formula for future value of annuity are-

F.V = P×$\frac{\left((1+r)^{n}-1\right)}{r}$

F.V = future value of annuity

P = Initial deposit; $1,000

r = rate of interest; 10%

Substitute the given values in the formula;

F.V = 1,000×$\frac{\left((1+0.01)^{3}-1\right)}{0.01}$

     = 1,000×3.03

F.V = 3030

Therefore, the future value of the annuity of the deposited amount of $1,000 is $3030.

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