Question

What's the future value of a 12%, 5-year ordinary annuity that pays $800 each year? Round your answer to the nearest cent. $ If this was an annuity due, what would its future value be? Round your answer to the nearest cent. $

Answer 1

Answer:

The Future value of annuity due of $800 per year at 12% for 5 years is $5,692.15

Explanation:

Annuity payment = P = $800 per year

Number of years = n = 5 years

Interest rate = r = 12% = 0.12

Use following formula to calulate the Future value of Annuity due.

Future value of annuity = ( 1+r) x P [((1+r)^n - 1) / r]

Future value of annuity = ( 1+0.12) x 800 [((1+0.12)^5 - 1) / 0.12]

Future value of annuity = $5,692.15

So,The Future value of annuity due of $800 per year at 12% for 5 years is $5,692.15