An annuity pays $1200 per year for 15 years. The money is invested at 5.2% compounded...

Question

Question

Answer 1

Answer #1

Future Value of an Ordinary Annuity
= C*[(1+i)^n-1]/i]

Where,
C= Cash Flow per period
i = interest rate per period
n=number of period

= $1200[ (1+0.052)^15 -1 /0.052]

= $1200[ (1.052)^15 -1 /0.052]

= $1200[ (2.1391 -1] /0.052]

= $26,287.49

Interest earned = $26287.49-(1200*15)

=$8287.49

Answer 2

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