Answer to Question #232422 in Financial Math for Nikka

Question

Find the future value and the present value of an annuity of 3500 payable at the end of each month for three years of the interest rate is (a) 5% compounded annually, and (b) 5% compounded quarterly.

Answer 1

Given information

Monthly Annuity Payment = 3500

Time Period = 3 years

Part a  The Interest rate =5%compounded annually

Part b  The Interest rate =5% compounded quarterly

 

Part a 

Future Value of Annuity

It can be computed as follows:

Present Value of an annuity 

It can be calculated as follows:

Part b 

Future Value of annuity 

It can be computed as follows:

Present Value of an annuity 

It can be calculated as follows:

Answers : 

Part a Future Value and Present Value of annuity at 5% interest rate compounded annually are 1,35,636.67 and 1,16,779.95 respectively

Part b Future Value and Present Value of annuity at 5% interest rate compounded quarterly are 1,35,827.83 and 1,16,614.74 respectively