R= 4600
8.73 interest compounded quarterly for 6 years.
( I know quarterly is 4)
How can I find the future value of this ordinary annuity?
05
May
R= 4600
8.73 interest compounded quarterly for 6 years.
( I know quarterly is 4)
misiekram
May 5, 2010 at 12:42 pm
quarterly means 4 times a year.
so the interest is compounded 4*6=24 times.
Therefore, in the end
(ENDSUM)=4600*(1+0.0873)^24
I got 34288.08
Can’t count though.
Okay, I won’t argue. I guess it would’ve helped if I’d heard anything about maths (or banking for that matter) in English. My understanding may be flawed so I stand down.
Manuel Sarmiento
May 5, 2010 at 1:32 pm
previous answer is wrong. Here is the correct one:
you know that ANUAL RATE is 8.73, although it is compounded (reinvested) quartely; thus, the quarterly reate is 8.73/4=2.1825%.
The first payment is reinvested 23 times, then
fv1=4600x (1.021825)^23;
the second payment is reinvested 22 times, then
fv2=4600 x (1.021825)^23;
the last payment is reinvested ZERO TIMES; then
fv24=4600x(1.021825)^0 = 4600;
etc.
then you add up fv1+fv2+…fv24;
Hope it helps. I won’t work out the full answer for you.
mathgirl826
May 5, 2010 at 2:13 pm
The formula for future value of an annuity is
FV = pymt((1+i)^n – 1)/i
where FV is the future value, pymt is the payment, i is the periodic interest rate, and n is the number of payments made.
pymnt = 4600
i = .0873/4 = .021825 because it is quarterly
n = 6(4) = 24 because you’re making 4 payments a year for 6 years
FV = 4600((1+.021825)^24 – 1)/.021825
= 143099.60