Question

You decide to save ₱ 1,000 per year in an account that offers a 5% annual interest rate. you plan to make these payments at the end of each year for the next 10 years. what will be the future value of this ordinary annuity?

Answer 1

The future value of this ordinary annuity will be approximately ₱12,579.63.

Step-by-step explanation:

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

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

Where:

FV is the future value of the annuity

P is the annual payment amount

r is the interest rate

n is the number of periods

In this case, P = ₱1,000, r = 5% (or 0.05), and n = 10. Plugging in these values into the formula, we get:

FV = ₱1,000*((1+0.05)^10 - 1)/0.05 = ₱1,000*(1.05^10 - 1)/0.05 = ₱1,000*(1.6289 - 1)/0.05 = ₱1,000*(0.6289)/0.05 ≈ ₱12,579.63

So, the future value of this ordinary annuity will be approximately ₱12,579.63.