Concept explainers
To calculate: The total interest amount and future value of annuity in the following table using Excel worksheet,
Annuity payment |
Annual Rate |
Annual interest |
Years |
Type of annuity |
Future value of annuity |
Total interest |
$1400 |
3% |
Compounded annually |
5 |
Ordinary |
Answer to Problem 1ES
Solution:
The total interest amount and future value of annuity in the following table is,
Annuity payment |
Annual Rate |
Annual interest |
Years |
Type of annuity |
Future value of annuity |
Total interest |
$1400 |
3% |
Compounded annually |
5 |
Ordinary |
$7432.790 |
$432.790 |
Explanation of Solution
Given Information:
The provided table is,
Annuity payment |
Annual Rate |
Annual interest |
Years |
Type of annuity |
Future value of annuity |
Total interest |
$1400 |
3% |
Compounded annually |
5 |
Ordinary |
Formula used:
Sinking fund payment
Calculation:
Consider the table,
Annuity payment |
Annual Rate |
Annual interest |
Years |
Type of annuity |
Future value of annuity |
Total interest |
$1400 |
3% |
Compounded annually |
5 |
Ordinary |
To find the Future value of annuity follow the steps,
Step 1: Open an Excel worksheet.
Step 2: Write the annuity payment $1400 in the cell B3.
Step 3: Write the annual rate of interest 3% in the cell B4.
Step 4: As the annual interest compounded annual hence write the number of period as 1 in the cell B5.
Step 5: Write the number of years 5 in the cell B6.
Step 6: To calculate the total number of period write “
Step 7: To calculate the periodic interest rate write “
Step 8: To calculate the Sinking fund payment write “
Step 9: To calculate the total payment write “
Step 10: To calculate the total interest write “
Therefore,
Therefore the completed table is,
Annuity payment |
Annual Rate |
Annual interest |
Years |
Type of annuity |
Future value of annuity |
Total interest |
$1400 |
3% |
Compounded annually |
5 |
Ordinary |
$7432.790 |
$432.790 |
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