   Chapter 12.I, Problem 2TIE ### 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

# Vista Savings & Loan is paying 6% interest compounded quarterly. Use Table 12-1 to calculate the future value of $1,000 deposited at the beginning of every 3 months for 5 years. To determine To calculate: The future value of$1,000 deposited, frequency of payment is 3 months, time duration is 5 years, nominal rate of return is 6% and interest is compounded quarterly.

Explanation

Given Information:

Annuity payment is $1,000, frequency of payment is 3 months, time duration is 5 years, nominal rate of return is 6% and interest is compounded quarterly. Formula used: Steps for calculating the future value of an annuity due are: Step 1: First the periods of the annuity of 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-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$1,000, frequency of payment is 3 months, time duration is 5 years, nominal rate of return is 6% and interest is compounded quarterly.

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

6%4=1

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