Question

Calculate the future value of an ordinary annuity consisting of quarterly payments of $1,100 for 6 years if the payments earn 10.40% compounded quarterly for the first year and 9.30% compounded quarterly for the last 5 years. For full marks your answer(s) should be rounded to the nearest cent.

Future value = $_______

Answer 1

To calculate the future value of an ordinary annuity with quarterly payments, use the formula FV = Payment x [((1 + interest rate)^(number of periods) - 1) / interest rate]. Substitute the given values and calculate the expression to find the future value.

Step-by-step explanation:

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

For the first year, the interest rate is 10.40% compounded quarterly, and for the remaining 5 years, the interest rate is 9.30% compounded quarterly. There are 4 quarters in a year, so the nuber of periods is 6 * 4 = 24.

Substituting these values into the formula:

`FV = $1,100 x [((1 + 0.1040/4)^24 - 1) / 0.1040/4] + $1,100 x [((1 + 0.0930/4)^24 - 1) / 0.0930/4]`

Calculating this expression will give you the future value of the annuity. Remember to round to the nearest cent for the final answer.