Question

Use the future value formula to find the indicated value.

Answer 1

Answer:

The future value = $1780

Step-by-step explanation:

* Lets explain the formula of the future value

- Future Value of an annuity is used to determine the future value of a

 stream of equal payments.

- The future value of an annuity formula can also be used to determine

  the number of payments, the interest rate, and the amount of the

  recurring payments

- The future value formula is $FV=\frac{PMT}{i}(1-\frac{1}{(1+i)^{n}})$

 where:

# FV = Future Value of the annuity

# PMT= Payment amount  

# i = Annual interest rate  

# n = Number of payments

* Lets solve the problem

- n = 27

- i = 0.04

- PMT = $109

- To find FV lets use the formula above

∵ n = 27 , i = 0.04 , PMT = 109

∴ $FV=\frac{109}{0.04}(1-\frac{1}{(1+0.04)^{27}})$

∴ $FV=2725(1-\frac{1}{(1.04)^{27}})=1779.9248$

∴ FV = 1779.92 ≅ 1780

∴ The future value = $1780