Answer:
= $ 219,657.43
Explanation:
FV of annuity = P x [(1+r) n -1/r]
P = Periodic payment = $ 20,000
r = Periodic interest rate = 0.08
n = Number of periods = 20
FV = $ 60,000 x [(1+ 0.08)20 -1/0.08]
= $ 60,000 x [(1.08)20 -1/0.08]
= $ 60,000 x [(4.66095714384931 -1)/0.08]
= $ 60,000 x (3.66095714384931/0.08)
= $ 60,000 x 45.7619642981163
= $ 2,745,717.85788698 or $ 2,745,717.86
FV of annuity due =(1+r) x P x [(1+r) n -1/r]
= (1+0.08) x $ 2,745,717.85788698
= 1.08 x $ 2,745,717.85788698
= $ 2,965,375.28651794 or $ 2,965,375.29
Difference in FV of ordinary annuity and annuity due
= $ 2,965,375.29 - $ 2,745,717.86
= $ 219,657.43
