(Round to the nearest cent) $130 monthly payment, 5.5 %interest, 1 year
I have no clue how to do this and any help would be appreciated:)
Help Please!!!Find the future value of the ordinary annuity?
04
Jun
(Round to the nearest cent) $130 monthly payment, 5.5 %interest, 1 year
I have no clue how to do this and any help would be appreciated:)
M3
June 4, 2010 at 12:47 pm
if you hv studied annuities,
u shd know the formula for an ordinary annuity is
A = P[(1 + r)^n - 1] / r
here
P = $130
r = [1/12][5.5/100] = 5.5/1200 …[divided by 12 because monthly compounding]
n = 12
plug in w/o any intermediate rounding off
so A = 130*[ (1 + 5.5/1200)^12 - 1] / (5.5/1200)
i get $ 1599.93
but you shd double check !
note:
——-
pl. remember that in an ordinary annuity
payments are at the end of each period,
& calculations hv been made accordingly
sahsjing
June 4, 2010 at 1:25 pm
Assume you pay at the beginning of each month. So, the money you paid the first month will be compounded 12 times, and the next 11 times etc.
130[r + r^2 + ... + r^12], where r = 1 + .055/12
= 130r(1-r^12)/(1-r)
= $1,607.26
If you use the formula, you can get the same result as I showed above.
A = P[(1 + r)^(n+1) - 1] / r