Mr A deposited $700 at the end of each month of calendar year 2010 in an investment account of 9% annual interest rate. Calculate the future value of the annuity on Dec 31, 2011. Compounding is done on monthly basis.

Guest Mar 19, 2019

#1**+1 **

FV=P{[1 + R]^N - 1/ R

FV=700{[1 + 0.09/12]^(2*12) - 1] / (0.09/12)}

FV=700{[1.0075]^24 - 1] / (0.0075)}

FV=700 x {26.188471.......}

**FV=$18,331.93 Note: This balance is on the assumption that 9% is compounded monthly.**

Guest Mar 19, 2019

#2**+1 **

NOTE (to the first Answer)

Mr A deposited 700$ only through the one year (2010),__ not__ through 2 years.

That means: in the year 2010 - 12deposits of 700$ each; in the year 2011 - 0 new deposits.

Through all the year 2011 amount of money (__I mean a capital only__) is unchanged and equels 8400$.

Guest Mar 19, 2019

edited by
Guest
Mar 19, 2019

edited by Guest Mar 19, 2019

edited by Guest Mar 19, 2019

edited by Guest Mar 19, 2019

edited by Guest Mar 19, 2019

#3**+2 **

Using the same formula the first guest posted for an ordinary annuity

use n = 12 and R = .09/12 = .0075

FV=P{[1 + R]^N - 1}/ R

FV = 700 {(1.0075)^12 - 1}/(.0075) = 8755.31 after the first year....

Now this amount gets compound interest monthly for the next 12 months

8755.31 (1+.0075)^12 = $ 9576.62

ElectricPavlov Mar 20, 2019