Question

Find the future value of an ordinary annuity of $50 paid quarterly for 5 years, if the interest rate is 6%, compounded quarterly. (Round your answer to the nearest cent.)

Answer 1

$1156.18

Explanation:

The future value (FV) is given from the payment (P), the interest rate (r) and the number of years (t) by ...

... FV = P·((1 +r/4)^(4t) -1)/(r/4)

... = (50)·(1 +.06/4)^(4·5) -1)/(.06/4)

... = 50·(1.015^20 -1)/.015 ≈ 1156.18

The future value is $1156.18.