   Chapter 12, Problem 2AT ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Note: Round to the nearest cent when necessary.Use Table 12-1 to calculate the future value of the following ordinary annuities. Annuity Payment Time Nominal Interest Future Value Payment Frequency Period (years) Rate (%) Compounded of the Annuity $10,000 every year 20 5 annually ________________ To determine To calculate: The future value of ordinary annuities where annuity payment is$10,000, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 5% and interest is compounded annually.

Explanation

Given Information:

Annuity payment is $10,000, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 5% and interest is compounded annually. Formula used: Steps for calculating the future value of an ordinary annuity are: Step1: First the interest rate per period for the annuity is calculated. Step2: The number of annuity periods should then be determined. Step 3: Use table 12-1 to locate the ordinary annuity table factor that lies on the intersection of the rate-per period column and number-of-periods row. Step 4: Finally future value of the ordinary annuity is calculated. The formula to compute the future value of ordinary annuity is, Future Value=Ordinary annuity table factor×Annuity payment Calculation: Consider that annuity payment is$10,000, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 5% and interest is compounded annually.

As the interest is compounded annually

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