Question

Calculate the future value of a $1,000 annuity due for three years at 8 percent (FVAD3). Notice that the cash flows for the annuity due are perceived to occur at the beginning of periods 2, 3, and 4.

a. $2,602.32
b. $2,548.80
c. $2,483.20
d. $2,420.56

Answer 1

To calculate the future value of a $1,000 annuity due for three years at 8 percent, you can use the formula FVAD = P * ((1 + r)^n - 1) / r. Plugging in the values, the future value is $2,548.80.

Step-by-step explanation:

To calculate the future value of a $1,000 annuity due for three years at 8 percent, we can use the formula for the future value of an annuity due:

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

Where:

• FVAD is the future value of the annuity due
• P is the periodic payment
• r is the interest rate per period
• n is the number of periods

Plugging in the values, we get:

FVAD = 1000 * ((1 + 0.08)^3 - 1) / 0.08 = $2,548.80