An investment pays $200 once every 2 years (at the end of the second year). The...
An investment pays $200 once every 2 years (at the end of the second year). The investment will last for 20 years. You can earn 8% APR on your investments. Which formula shows the value of this investment after the last payment?
Homework Answers
Since these are finite periodic payments at the end of periods, this is an ordinary annuity.
We can find out the future value of ordinary annuity using the formula
FV = Periodic payments * ((1+r)^n -1)/ r
Periodic payments = 200
r =8%*2 = 16%
n = 20/2 = 10
Putting these values in the formula, we get
FV = 4264.29
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