SOLUTION: The steps for these types of problems continue to perplex me: "A business owner decided to purchase an annuity to pay for new copy machines in 6 years. The payment is $2,850 at

Question 970801: The steps for these types of problems continue to perplex me:
"A business owner decided to purchase an annuity to pay for new copy machines in 6 years. The payment is $2,850 at 8% interest compounded quarterly. Find the future value of the annuity in 6 years. Round your answer to the nearest cent."
Answer by Boreal(15235) (Show Source): You can put this solution on YOUR website!
A=P{1+ .08/4}^24
This is the interest rate divided by the compounding frequency raised to the number of times compounded. 6 years at 4 times a year is where the 24 comes from. The 8% is divided by 4 to equal the change each quarter.
$1 at 5% after 1 year $1.05 After two years $1.05^.05 etc. Faster compounding lessens the amount for each time but increases the number.
A=2850{1.02}^24=$4585.05
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