   Chapter 12.I, Problem 14RE ### 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

# Solve the following exercises by using Table 12-1.Jorge Otero has set up an annuity due with the United Credit Union. At the beginning of each month. $170 is electronically debited from his checking account and placed into a savings account earning 6% interest compounded monthly. What is the value of Jorge's account after 18 months? To determine To calculate: The value of Jorge’s account after 18 months where$170 is credited electronically into a savings account, time duration is 18 months, nominal rate of return is 6% and interest is compounded monthly.

Explanation

Given Information:

Annuity payment is $170, time duration is 18 months, nominal rate of return is 6% and interest is compounded monthly. Formula used: Steps for calculating the future value of an annuity due are: Step 1: Calculate the number of periods of the annuity and add one period to total. Step 2: The interest rate per period must be calculated. 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: The number 1.00000 must be subtracted from the ordinary annuity table in order to get the annuity due factor. Step 5: Finally calculate the future value of the annuity due. The formula to compute the future value of ordinary annuity is, Future Value=Annuity due table factor×Annuity payment Annuity due table factor=Ordinary annuity table factor1.00000 Calculation: Consider that Annuity payment is$170, time duration is 18 months, nominal rate of return is 6% and interest is compounded monthly.

As the interest is compounded monthly. So, the interest rate period is;

6%12=0

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