Answer to Question #171432 in Financial Math for King

Question #171432

future value of ordinary annuity


bab savings and loan is paying 6% interest compounded monthly. How much will 1000 deposited at the end of each month be worth after 2 years?


1
Expert's answer
2021-03-24T09:09:36-0400

Since payments of an ordinary annuity are made at the end of a period and the last payment does not earn interest;


FVOA =A  (1+r)n1rFVOA\ =A\ *\ \frac{{(1+r)}^n-1}{r}


rate compounded monthly = 0.0612 = 0.005 interest p.mrate\ compounded\ monthly\ =\ \frac{0.06}{12}\ =\ 0.005\ interest\ p.m



FVOA =300,000  (1+0.005)2410.005 = 25,431.96FVOA\ =300,000\ *\ \frac{{(1+0.005)}^{24}-1}{0.005}\ =\ 25,431.96


The future value of ordinary annuity will be $25,431.96The\ future\ value\ of\ ordinary\ annuity \ will\ be \ \$25,431.96










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