Future value of annuities Bookmarks People Window Help Aplia: Student Question ?
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Future value of annuities Bookmarks People Window Help Aplia: Student Question ? MindTap-Cengage Learning x https://courses.aplia.com/af/servlet/quiz?quiz action-takeQuiz&quiz; probGuid-QNAPCOA8010100000041ca25e00d00008 mer 11 2018 Aaron Plant, I a HomeGrades d Reviews Time Value of Money Graded Assignment |Read Chapter 51 Back to Assignment Due Sunday 06.17.18 at 11:45 PM Attempts: 10. Future value of annuities When payments are made at the end of each period, you will treat them as Keep the Highest: 3 an annuity due You are planning to put $3,250 in the bank at the end of each year for the next eight years in hopes that you will have enough money for a new boat. If you are investing at an annual interest rate of 9%, youw have accumulated at the end of cight years You decided to deposit your money in the bank at the beginning of the year instead of the end of the same year, but now you are making payments of $2,750 at an annual interest rate of 5%. How much money will you have available at the end of six years? O $14,961 $19,641 O$14,249 O $15,304Explanation / Answer
An annuity due is a series of payments in which equal amount is paid at the beginning of each period, while the amounts are paid at the end of each period in case of ordinary annuity. Hence, an annuity due always earns more interest than an ordinary annuity, others factors remaining constant.
When Payments are made at the end of each period, you will treat them as an ORDINARY ANNUITY
Amount at the end of 8 years = 3,250*((1+r)n-1)/r
=$35,842.54
In case of annuity due, Amount at the end of 6 years
= (1+r) * Periodic payment (((1+r)n-1)/r)
Therefore, amount at the end of 6 years = $19,641
i.e. b
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