Question

Find the future value of an ordinary annuity of $60 paid at the end of each quarter for 4 years, if interest is earned at a rate of 3%, compounded quarterly. The future value is S (Round to 2 decimal places.)

a) $1122.53
b) $1146.78
c) $1181.20
d) $1205.45

Answer 1

To find the future value of an ordinary annuity, we can use the formula: Future Value = P * ((1 + r)^n - 1) / r. Substituting the given values, the future value of the annuity is approximately $1122.53, making option a) $1122.53 the correct answer.

Step-by-step explanation:

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

Future Value = P * ((1 + r)^n - 1) / r

Where:

• P is the amount paid at the end of each period. In this case, it is $60.
• r is the interest rate per period. In this case, it is 3% or 0.03.
• n is the number of periods. In this case, it is 4 years * 4 quarters = 16 quarters.

Substituting the values into the formula:

Future Value = 60 * ((1 + 0.03)^16 - 1) / 0.03 ≈ $1122.53

Therefore, the future value of the annuity is $1122.53. Option a) $1122.53 is the correct answer.