Question

What is the future value of a 5 year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate?

a.$670.44
b.$842.91
c.$1,169.56
d.$1,522.64
e.$1,348.48 200

Answer 1

Answer: The future value is $1348.48

Step-by-step explanation:

To calculate the future value of annuity, we use the equation:

`\text{Future value of annuity}=P[((1+r)^n-1)/(r)]`

where,

P = principle amount = $ 200

r = Rate of interest = 15 % = 0.15

n = number of periods = 5

Putting values in above equation, we get:

`\text{Future value of annuity}=200[((1+0.15)^5-1)/(0.15)]\\\\\text{Future value of annuity}=\$ 1348.48`

Hence, the future value is $1348.48