Problem 3 Calculate the future value of the following annuity streams: (Use an e
ID: 2736396 • Letter: P
Question
Problem 3 Calculate the future value of the following annuity streams:
(Use an excel worksheet to show calculations)
A) $ 5,000 received each year for 5 years on the last day of each year if your investments pay
6% compounded annually?
B) $ 1,250 received each quarter for 5 years on the last day of each quarter if your investments
pay 6% compounded quarterly?
C) $ 5,000 received each year for 5 years on the first day of each year if your investments pay
6% compounded annually?
D) $ 1,250 received each quarter for 5 years on the first day of each quarter if your investments
pay 6% compounded quarterly?
Recommended excel format
Rate NPER PMT PV FV
Explanation / Answer
Problem N0.
Rate
NPER
PMT
PV
FV
Explanation
A
6% p.a.
5 Yrs
5000 (Last Day)
-
28,185
1
B
6% p.a.
5 Yrs (Compounded Querterly)
5000 (Last Day)
-
28,905
2
C
6% p.a.
5 Yrs
5000 (First Day)
-
29,876
3
D
6% p.a.
5 Yrs (Compounded Querterly)
5000 (First Day)
-
29,338
4
Explanation 1
Future Value of annuity
=
P[(1+r)n-1]
r
=
5000(1.338226-1)
0.06
=
28185
Explanation 2
Future Value of annuity
=
P[(1+r)n-1]
r
=
1250(1.346855-1)
0.015
=
28905
Explanation 3
Future Value of annuity
=
P[(1+r)n-1]
*(1+r)
r
=
5000(1.338226-1)
*1.06
0.06
=
29876.1
Explanation 4
Future Value of annuity
=
P[(1+r)n-1]
*(1+r)
r
=
1250(1.346855-1)
*1.015
0.015
=
29338.575
Problem N0.
Rate
NPER
PMT
PV
FV
Explanation
A
6% p.a.
5 Yrs
5000 (Last Day)
-
28,185
1
B
6% p.a.
5 Yrs (Compounded Querterly)
5000 (Last Day)
-
28,905
2
C
6% p.a.
5 Yrs
5000 (First Day)
-
29,876
3
D
6% p.a.
5 Yrs (Compounded Querterly)
5000 (First Day)
-
29,338
4
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