Question

Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity. However, an exception occurs when the annuty payments come at the beginning of each ponad (termed an annuity due) What is the future value of a 14-year annuity of $2,100 per period where payments come at the beginning of each period? The interest rate is 13 percent. Use Appendix for an Approximate answer, but calculate your final answer using the formula and financial Calculator methods to find the future value of an annuity due when using the Appendix tables, add 1 to n and subtract 1 from the tabular value. For example to find the future value of a $100 payment at the beginning of each period for five periods at 10 percent go to Appendix C for and/10 percent. Look up the value of 7710 and subtract 1 from it for an answer of 6.716 or $671.80 ($100 8.716) (Do not found intermediate calculations. Round your final answer to 2 decimal places.) 6 Future value

Answer 1

FV of the annuity due
P = PMT x ((((1 + r) ^ n) - 1) / r)*(1+r)
Where:
P = the future value of an annuity stream	To be computed
PMT = the dollar amount of each annuity payment	2100
r = the effective interest rate (also known as the discount rate)	13%
n = the number of periods in which payments will be made	14
Future value of Annuity=	PMT x ((((1 + r) ^ n) - 1) / r)*(1+r)
Future value of Annuity=	2100*((((1 + 13%) ^ 14) - 1) / 13%)*(1+13%)
Future value of Annuity=	$ 82,776.68