Question

I can't find how to get the value of the annuity in (2).

Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Amount of annuity $8,500 Interest rate 7% Deposit period (years) 10 a. Calculate the future value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a 2). All else being identical, which type of annuity-ordinary or annuity due—is preferable as an investment? Explain why. a. (1) The future value of the ordinary annuity is S 117,439.81. (Round to the nearest cent.) (2) The future value of the annuity due is $ 125,660.59. (Round to the nearest cent.) b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity is preferable as an investment? (Select the best answer below.) O Ordinary annuity, because it yields a greater future value. Annuity due, because it yields a greater future value.

Answer 1

ANSWER: 125,660.59 Annual Investment to achieve 620,046.35 in 6 years FV of annuity due = (1+r) xP (1+r)^n -1 * r . P = 8,500 r = 7% n = 10 ((1+0.07) ^ 10 -1 FV of annuity due = (1+0.07) x 8,500 = 125,660.59