Question

points Save A What is the future value of an ordinary annuity consisting of quarterly payments of $1400 for six years if the interest rate is 8% compounded quarterly for the first four years and compounded quarterly for the last two years? TTTT Paragraph Arial 3(12pt) - E - 1 %DO Q E T'T Sc Mashups - 14

Answer 1

Year	Quarter	Payment	Quarterly interest rate	Discount factor	Beginning value before current quarter payment	Ending value before before quarter payment	Ending quarter value
		i	r	d = (1+r)	a	b= a × d	c= i + b
1	1	$   1,400.00	2.00%	102.00%	$                          -	$                          -	$              1,400.00
1	2	$   1,400.00	2.00%	102.00%	$              1,400.00	$              1,428.00	$              2,828.00
1	3	$   1,400.00	2.00%	102.00%	$              2,828.00	$              2,884.56	$              4,284.56
1	4	$   1,400.00	2.00%	102.00%	$              4,284.56	$              4,370.25	$              5,770.25
2	1	$   1,400.00	2.00%	102.00%	$              5,770.25	$              5,885.66	$              7,285.66
2	2	$   1,400.00	2.00%	102.00%	$              7,285.66	$              7,431.37	$              8,831.37
2	3	$   1,400.00	2.00%	102.00%	$              8,831.37	$              9,008.00	$           10,408.00
2	4	$   1,400.00	2.00%	102.00%	$           10,408.00	$           10,616.16	$           12,016.16
3	1	$   1,400.00	2.00%	102.00%	$           12,016.16	$           12,256.48	$           13,656.48
3	2	$   1,400.00	2.00%	102.00%	$           13,656.48	$           13,929.61	$           15,329.61
3	3	$   1,400.00	2.00%	102.00%	$           15,329.61	$           15,636.20	$           17,036.20
3	4	$   1,400.00	2.00%	102.00%	$           17,036.20	$           17,376.93	$           18,776.93
4	1	$   1,400.00	2.00%	102.00%	$           18,776.93	$           19,152.46	$           20,552.46
4	2	$   1,400.00	2.00%	102.00%	$           20,552.46	$           20,963.51	$           22,363.51
4	3	$   1,400.00	2.00%	102.00%	$           22,363.51	$           22,810.78	$           24,210.78
4	4	$   1,400.00	2.00%	102.00%	$           24,210.78	$           24,695.00	$           26,095.00
5	1	$   1,400.00	1.50%	101.50%	$           26,095.00	$           26,486.42	$           27,886.42
5	2	$   1,400.00	1.50%	101.50%	$           27,886.42	$           28,304.72	$           29,704.72
5	3	$   1,400.00	1.50%	101.50%	$           29,704.72	$           30,150.29	$           31,550.29
5	4	$   1,400.00	1.50%	101.50%	$           31,550.29	$           32,023.55	$           33,423.55
6	1	$   1,400.00	1.50%	101.50%	$           33,423.55	$           33,924.90	$           35,324.90
6	2	$   1,400.00	1.50%	101.50%	$           35,324.90	$           35,854.77	$           37,254.77
6	3	$   1,400.00	1.50%	101.50%	$           37,254.77	$           37,813.59	$           39,213.59
6	4	$   1,400.00	1.50%	101.50%	$           39,213.59	$           39,801.80	$           41,201.80

Future value of annuity is $41,201.80.

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