Question

Let $ 500 be paid at the end of each quarter for 5 years. If the interest is earned rate of 13%, compounded quarterly, find the future value of this ordinary annuity. a. $ 13,782.12 O b. $ 8,223.66 c. $ 21,315.22 O d. non of them e. $ 31,201.08

Answer 1

Future value of annuity (FV) = $13,782.12 (Approx)

Explanation:

Given:

Periodic payment p = $500

Interest rate r = 13% = 13%/4 = 0.0325 (Quarterly)

Number of period n = 5 x 4 = 20 quarter

Find:

Future value of annuity (FV)

Computation:

`Future\ value\ of\ annuity\ (FV)=p[((1+r)^n-1)/(r) ] \\\\Future\ value\ of\ annuity\ (FV)=500[((1+0.0325)^(20)-1)/(0.0325) ] \\\\Future\ value\ of\ annuity\ (FV)=13,782.1219 \\\\`

Future value of annuity (FV) = $13,782.12 (Approx)