Question

Question 20 (7 points) Calculate the future amount of the annuity given the following information. A= Time Regular Compounded Annual Deposit Interest Rate $30 Quarterly 7.8% 5 years 1) $29.486.76 hy 2) $8,864.32 3) $3.52 4) $725.30

Answer 1

Option (4) is correct

Given formula is:

A = P * (1 + r / n)^nt - 1 ) / r / n

Here,, P is the periodical amount = $30 , r is the rate of interest = 7.8% and n is the time period = 5

Now, putting these values in the above formula, we get,

A = $30 * ((1 + 7.8% / 4)^{5* 4} - 1 ) / (7.8% /4)

A = $30 * ((1 + 1.95%)²⁰ - 1 ) / (1.95%)

A = $30 * ((1 + 0.0195)²⁰ - 1 ) / (0.0195)

A = $30 * ((1.0195)²⁰ - 1 ) / (0.0195)

A = $30 * ((1.47144692683 - 1 ) / (0.0195)

A = $30 * ((0.47144692683) / (0.0195)

A = $30 * 24.1767565

A = $725.30