Answer to Question #171435 in Financial Math for King

Question

Future value of ordinary annuity

the bethel hardware store has been in business for a few years and is doing very well. The owner has decided to save for a future expansion to a second location. He invest 10,000 at the end of every month at 12% interest compounded monthly

(a) how well will be available for the second store after 2&1/2 years?

(b) how much would be in the account of the owner of the hardware saved for 5 years.

Answer 1

(a) $FVa = \frac{10,000×((1 + 0.12/12)^{30} - 1)} {0.12/12} = 347,848.92.$

(b) $FVa = \frac{10,000×((1 + 0.12/12)^{60} - 1)} {0.12/12} = 816,696.7.$