Chapter 12.I, Problem 19RE

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

Contemporary Mathematics for Busin...

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

Annuities Due Annuity Payment Time Nominal Interest Future Value Payment Frequency Period (years) Rate (%) Compounded of the Annuity 19. $675 every month 5 1.5 monthly$42.082.72

To determine

To calculate: The future value of annuity due where annuity payment is $675, frequency of payment is every month, time duration is 5 years, nominal rate of return is 1.5% and interest is compounded monthly and future value of annuity is$12,459.10.

Explanation

Given Information:

Annuity payment is $675, frequency of payment is every month, time duration is 5 years, nominal rate of return is 1.5% and interest is compounded monthly and future value of annuity is$12,459.10.

Formula used:

Steps for calculating the future value of an annuity due are:

Step 1: First the periods of the annuity must be calculated.

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 column and period rows.

Step 4: 1.00000 must be subtracted from the ordinary annuity table in order to get the annuity due factor.

Step 5: 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 \$675, frequency of payment is 12 months, time duration is 5 years, nominal rate of return is 1.5% and interest is compounded monthly

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