Question

Find the present and future value of $1000 received every month end for 20 years if the interest rate is J12 = 12% p.a.

Answer 1

I) PVOA is present value of an annuity

$=Payment ×\frac{1 - (1+r) ^{-n}} {r}$

=$1,000×\frac{1 - (1+0.01) ^{-240}} {0.01}$

PVOA =$90,819.42

ii) FVOA is the future value of the Annuity

$=Payment ×\frac{(1+r) ^{n}-1} {r}$

=$Payment ×\frac{(1+0.01) ^{240}-1} {0.01}$

FVOA=$989,255.37