Question

Ed Sloan invests $1,600 at the beginning of each year for eight years into an account that pays 10% compounded semiannually. The value of the annuity due is (use the tables in the handbook):

Answer 1

FV=PV(r+1)ⁿ
FV=Future value, or your amount of money you're going to have after 8 years.
PV=Present value, or the amount of money you have just invested.
APR=10
FV=1,600(10+1)¹⁶
FV=1,600(11)¹⁶
FV=1,600(176)
FV=$281,600

Answer 2

Answer:

The answer is: $39,748.80

Step-by-step explanation:

The principle amount is p = $1600  

rate is 10% or 0.10 but as its compounded semiannually it becomes,

$\frac{0.10}{2}$ = 0.05  

n = $8\times 2$ =16

Formula is :

$p\frac{(1+r)^{n}-1 (1+r)}{r}$

Putting values in formula we get

$\frac{1600(1+0.05)^{16}-1(1+0.05) }{0.05}$

$\frac{1600(1.05)^{16}-1(1.05) }{0.05}$

$\frac{1600*(2.183-1)(1.05)}{0.05}$ = 39748.80

The value of the annuity due is $39,748.80