Answer to Question #225434 in Financial Math for Amanpreet Kaur

Question

Brooke pays $239.52 for a car lease at the beginning of every quarter for 5 years and 9 months at 4.46% compounded quarterly. What type of annuity is this?

 

Answer 1

Annuity due because cash flow occurs at the beginning of each period.

Future Value$=$ PMT$×\frac {(1+r)^n-1}{r}$ $×$ $(1+r)$

PMT$=$ period cashflows

r$=$ periodic interest rate

n$=$ Total number of payments

239.53$×$ $\frac {(1+0.0115)^{23}-1}{0.01115}$ $×$ $($ 1$+$ 0.01115$)$

Answer $=$$ 6310.02