Question

What's the future value of an 11%, 5-year ordinary annuity that pays $800 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent. Future Value of an Ordinary Annuity: $ Future Value of an Annuity Due: $

Answer 1

The Future Value of  Ordinary Annuity Formula

Future Value of Ordinary Annuity = C*[((1+r)ⁿ – 1)/ r]

The Annuity due Formula

Future Value Annuity Due =C*[((1+r)ⁿ – 1)/ r]*(1 + r)

C = Amount of each annuity payment = $800

n = Time period = 5 year

r = rate per period = 11%

Future Value of Ordinary Annuity = 800*[(1.11⁵ – 1)/ 0.11] = $4982.24

Future Value Annuity Due =800*[(1.11⁵ – 1)/ 0.11] *1.11 = $5530.28