Question

Future Value of an Ordinary Annuity 5-8: Future Value of an Annuity Due Future value of an annuity Find the future values of these ordinary annuities. Compounding occurs once a year. Round your answers to the nearest cent.

$200 per year for 10 years at 14%. $ ______

Answer 1

The future value of an ordinary annuity with $200 deposited per year for 10 years at an interest rate of 14% is approximately $5,187.48, calculated using the future value annuity formula.

Step-by-step explanation:

To find the future value of an ordinary annuity, we use the future value annuity formula:

FV = P × ` { [ (1 + r)ⁿˉⁱ - 1 ] / r }

Where FV is the future value, P is the payment per period, r is the interest rate per period, and n is the number of periods. In this case, you are asked to calculate the future value of $200 per year for 10 years at an interest rate of 14%.

So, P = $200, r = 0.14, and n = 10.

Let's insert these values into the formula:

FV = $200 × [ (1 + 0.14)¹⁰ - 1 ] / 0.14

FV = $200 × [ (1.14)¹⁰ - 1 ] / 0.14

FV = $200 × 25.9374

FV ≈ $5,187.48

After rounding to the nearest cent, the future value of the ordinary annuity is $5,187.48.