14 whats the future value of a 7 5year ordinary annuity that

14, what\'s the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this was an annuity due, what would its future value be?

Solution

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=$300[(1.07)^5-1]/0.07

=$300*5.75073901

=$1725.22(Approx).

Future value of annuity due=Future value of annuity*(1+interest rate)

=$1725.22(1+0.07)

=$1845.99(Approx).