Future Value of an Annuity Find the future value of the following annuities. The

Question

Future Value of an Annuity

Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1; that is, they are ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.)

Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

Explanation / Answer

1. Future value = 600 * ((1+10%)^10 - 1) / 10% = 9562.45

2. Future value = 300 * ((1+5%)^5 - 1) / 5% = 1657.69

3. Future value = 600 * 5 = 3000

4. Future value = 600 * ((1+10%)^10 - 1) / 10% * (1+10%) = 10,518.70

5. Future value = 300 * ((1+5%)^5 - 1) / 5% * (1+5%) = 1,740.57

6. Future value = 600 * 5 = 3000

Hope this helped ! Let me know in case of any queries.

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