   Chapter 12.I, Problem 18RE ### 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 formulas.Ordinary Annuities Annuity Payment Time Nominal Interest Future Value Payment Frequency Period (years) Rate (%) Compounded of the Annuity 18.$1.800 every 3 months 3 1 2 4.0 quarterly To determine To calculate: The future value of ordinary annuity where annuity payment is$1,800, frequency of payment is 3 months, time duration is 312 years, nominal rate of return is 4% and interest is compounded quarterly.

Explanation

Given Information:

Annuity payment is $1,800, frequency of payment is 3 months, time duration is 312 years, nominal rate of return is 4% and interest is compounded quarterly. Formula used: Steps for calculating the future value of an ordinary annuity are: Step 1: First the interest rate per period for the annuity is calculated. Step 2: 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 column and period rows. 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$1,800, frequency of payment is 3 months, time duration is 312 years, nominal rate of return is 4% and interest is compounded quarterly.

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

4%4=1%

The rate period is 1%

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