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ii). An ordinary due annuity pays Nu.200 at the end of each month for 4 years. If the interest is 3.5% per year, what is the future value of this annuity?​

User DaveKub
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Explanation:

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

Future Value = Payment × [(1 + r)^n - 1] / r

Where:

Payment = Amount paid at the end of each period (Nu.200 in this case)

r = Interest rate per period (monthly rate in this case)

n = Number of periods (number of months in this case)

Given:

Payment = Nu.200

Interest rate = 3.5% per year

Number of years = 4

To calculate the monthly interest rate, we divide the annual interest rate by 12 (number of months in a year):

Monthly interest rate = (3.5% / 100) / 12 = 0.002917 (approximately)

To calculate the number of periods, we multiply the number of years by 12 (number of months in a year):

Number of periods = 4 years × 12 months/year = 48

Now, we can plug these values into the formula to calculate the future value:

Future Value = Nu.200 × [(1 + 0.002917)^48 - 1] / 0.002917

Calculating this expression will give us the future value of the annuity.

Future Value ≈ Nu.200 × [1.17768 - 1] / 0.002917

Future Value ≈ Nu.200 × 0.17768 / 0.002917

Future Value ≈ Nu.200 × 60.907

Therefore, the future value of this ordinary due annuity is approximately Nu.12,181.40.

User JF Dion
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