In the following ordinary annuity the interest is compounded

In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the accumulated amount of the annuity. (Round your answer to the nearest cent.) $1000 monthly at 6.1% for 20 years.

Solution

FV = PV(1+i)ⁿ

Where, FV = Accumulated amount or future value

PV = principal value = $1000

i = interest per month = (6.1/12)% (because the number of compunding = 12 as it is compounded monthly)

=> i = 0.50833% monthly

n= 12(Term) in years = 12(20) = 240 number of compoundings

So , FV = 1000(1+0.5083)²⁴⁰ = 1000(1.5083)²⁴⁰ = 1000(6.87156 x 10⁴²) = 6.87156x10⁴⁵