SOLUTION: Find the future value of an ordinary annuity of $800 paid quarterly for 4 years, if the interest rate is 12%, compounded quarterly. (Round your answer to the nearest cent.)
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Question 1088950: Find the future value of an ordinary annuity of $800 paid quarterly for 4 years, if the interest rate is 12%, compounded quarterly. (Round your answer to the nearest cent.) Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website! annuity is 800 every quarter.
time periods are quarters
4 years * 4 time periods a year = 16 time periods.
interest rate percent of 12% per year / 4 = 3% per quarterly time period.
you want the future value of the annuity.
the following time value of money calculator will do it for you.
present value = 0
future value = 0
number of periods = 16
payment amount = 800
interest rate per period % = 3
select payment at end of time period
click on FV and the calculator tells you that the future value of the annuity is equal to -16,125.5
if you had entered the payment as negative, then the future value would have been positive.
your solution is that the future value of the annuity is $16,125.5
here's a picture of the results of the use of the calculator.
if you want to calculate it manually, use the following formula.
FUTURE VALUE OF AN ANNUITY WITH END OF TIME PERIOD PAYMENTS
f = (a*((1+r)^n-1))/r
f is the future value of the annuity.
a is the annuity.
r is the interest rate per time period.
n is the number of time periods
make sure to use the parentheses exactly as shown, otherwise you won't get the right answer.
a = 800
r = .03 (rate = rate percent divided by 100)
n = 12
