Question

Find the interest earned and the future value of an annuity with quarterly payments of $600 for 8 years into an account that pays 5% interest per year compounded quarterly.

Answer 1

interest earned= 292.878

the future value of an annuity= 892.878

Explanation:

Given Data:

Interest rate= 5%

time,t = 8 years

Quarterly payment, P= 600

n= 4 as quarterly

At the end of 8 years, final investment A= ?

As per the interest formula

A= P(1+r/n)^nt

= 600(1+0.05/4)^32

= 892.878

Interest earned = A-P

= 892.878-600

= 292.878 !