Question

What is the future value of an ordinary annuity due, assuming compounding occurs once a year?

A) $500 per year for 8 years at 14%
B) $250 per year for 4 years at 7%
C) $700 per year for 4 years at 0%

Answer 1

The future value of an ordinary annuity due can be calculated using the formula: FV = PMT x [(1 + r)^(n-1)] x (1+r). For the given options, the future values are: Option A: $6907.19, Option B: $1017.49, Option C: $2800.

Step-by-step explanation:

The future value of an ordinary annuity due can be calculated using the formula: FV = PMT x [(1 + r)^(n-1)] x (1+r) where FV is the future value, PMT is the payment amount per period, r is the interest rate per period, and n is the number of periods.

1. For option A, the future value would be $6907.19.
2. For option B, the future value would be $1017.49.
3. For option C, the future value would be $2800.

Therefore, the future values for the given options are:

• Option A: $6907.19
• Option B: $1017.49
• Option C: $2800