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O Click here to read the eBook: Future Value of an Ordinary Annuity Click here to read the eBook: Semiannual and Other Compounding Periods FUTURE VALUE OF AN ANNUITY O Find the future values of the following ordinary annuities 0 a. FV of $700 paid each 6 months for 5 years at a nominal rate of 9% compounded semiannually. Round your answer to the nearest cent. b. FV of $350 paid each 3 months for 5 years at a nominal rate of 9% compounded quarterty. Round your answer to the nearest cent. he nuty in pat b ends up la er c. These annuities receive the same amount of cash during the 5-year period and earn interest at the same nominal rate, yet the a one in part a. Whv does this occur? The nominal deposits into the annuity in part tb) are greater than the nominal depesits into the annuity in part ta). The annaity in part la) is compounded less frequently, therefore, more interest is earned on earned interest The annuity In part (b) is Check My Work (3 remaining) 20 888 a 2 8 2 W E

Explanation / Answer

Part A:

FV = CF * [ ( 1+r)n - 1 ] / r

= $ 700 * [ ( 1+0.045)10 - 1 ] / 0.045

= $ 700 * [ ( 1.045)10 - 1 ] / 0.045

= $ 700 * [ 1.5530 - 1 ] / 0.045

= $ 700 * [ 0.5530 ] / 0.045

= $ 8602.22

Part B:

FV = CF * [ ( 1+r)n - 1 ] / r

= $ 350 * [ ( 1+0.0225)20 - 1 ] / 0.0225

= $ 350 * [ ( 1.0225)20 - 1 ] / 0.0225

= $ 350 * [ 1.5605 - 1 ] / 0.0225

= $ 350 * [ 0.5605 ] / 0.0225

= $ 8718.89

Part C:

Annuity in PArt B is computed more frequently, thus more int is earned on previous deposits.

Pls comment, if any furtehr assistance is required.

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