Question

Find the future values of these ordinary annuities. Compounding occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.
(a) $1,000 per year for 16 years at 14%
(b) $500 per year for 8 years at 7%.
(c) $600 per year for 4 years at 0%.
(d) $1,000 per year for 16 years at 14%
(e) $500 per year for 8 years at 7%
(f) $600 per year for 4 years at 0%.

Answer 1

Answer:

(a) $50,980.35

(b) $5,129.90

(c) $2,400

(d) $50,980.35

(e) $5,129.90

(f) $2,400

Explanation:

A constant payment for a specified period is called annuity. The future value of the annuity can be calculated using a required rate of return.

Formula for Future value of annuity is

F = P * ([1 + I]^N - 1 )/I

P =Payment amount

I = interest rate

N = Number of periods

(a) $1,000 per year for 16 years at 14%

F = $1,000 x ([1 + 14%]^16 - 1 )/14%

F = $50,980.35

(b) $500 per year for 8 years at 7%

F = $500 x ([1 + 7%]^8 - 1 )/7%

F = $5,129.90

(c) $600 per year for 4 years at 0%.

F = $600 x 4

F = $2,400

(d) $1,000 per year for 16 years at 14%

F = $1,000 x ([1 + 14%]^16 - 1 )/14%

F = $50,980.35

(e) $500 per year for 8 years at 7%

F = $500 x ([1 + 7%]^8 - 1 )/7%

F = $5,129.90

(f) $600 per year for 4 years at 0%.

F = $600 x 4

F = $2,400