If you start making $190 monthly contributions today and continue them for five
ID: 2743250 • Letter: I
Question
If you start making $190 monthly contributions today and continue them for five years, what’s their future value if the compounding rate is 11.00 percent APR? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Future value annuity
What is the present value of this annuity? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
$
$
If you start making $190 monthly contributions today and continue them for five years, what’s their future value if the compounding rate is 11.00 percent APR? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Explanation / Answer
Calculation of future value
future value of annuity =C* (1+i)n-1/i
cashflow= $ 190
i= 11%/12= 0.9167%(monthly compoundind)
n= 5*12= 60 periods
=190(1+0.009167)60-1/0.009167
= 190(1.72895-1)/0.009167
= 190(0.72895/0.009167)
= 190(79.6171)
= $15127.25
Calculation of pesent value
present value of annuity =C* (1-(1+i)-n/i
cashflow= $ 190
i= 11%/12= 0.9167%(monthly compoundind)
n= 5*12= 60 periods
present value = 190*(1-(1+0.009167)-60/0.009167
= 190(1-(1/(1.009167)60/0.009167
= 190*(1-0.57839)/0.009167
= 190*0.42161/0.009167
= 190*45.9922
= $ 8738.52
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