Question

What is the value at the end of 6 years of a series of 6 annual payments of $400 made at the end of each year and earning 4.5% compounded annually? For full marks your answer(s) should be rounded to the nearest cent.

Future value= $______

Answer 1

The future value of a series of 6 annual payments of $400, earning 4.5% compounded annually, is $2,742.86.

Step-by-step explanation:

To find the total future value of a series of annual payments, we can use the formula:

Future Value = Payment Amount x [(1 + Interest Rate) ^ Number of Payments - 1] / Interest Rate

Plugging in the given values:

Payment Amount = $400

Interest Rate = 4.5% = 0.045

Number of Payments = 6

Using this formula, we can calculate the future value:

Future Value = $400 x [(1 + 0.045) ^ 6 - 1] / 0.045

Future Value = $400 x [1.308717 - 1] / 0.045

Future Value = $400 x 0.308717 / 0.045

Future Value = $2,742.86