Question

Present and future value tables of $1 at 3% are presented below:

N

FV $1

PV $1

FVA $1

PVA $1

FVAD $1

PVAD $1

1

1.03000

0.97087

1.0000

0.97087

1.0300

1.00000

2

1.06090

0.94260

2.0300

1.91347

2.0909

1.97087

3

1.09273

0.91514

3.0909

2.82861

3.1836

2.91347

4

1.12551

0.88849

4.1836

3.71710

4.3091

3.82861

5

1.15927

0.86261

5.3091

4.57971

5.4684

4.71710

6

1.19405

0.83748

6.4684

5.41719

6.6625

5.57971

7

1.22987

0.81309

7.6625

6.23028

7.8923

6.41719

8

1.26677

0.78941

8.8923

7.01969

9.1591

7.23028

9

1.30477

0.76642

10.1591

7.78611

10.4639

8.01969

10

1.34392

0.74409

11.4639

8.53020

11.8078

8.78611

11

1.38423

0.72242

12.8078

9.25262

13.1920

9.53020

12

1.42576

0.70138

14.1920

9.95400

14.6178

10.25262

13

1.46853

0.68095

15.6178

10.63496

16.0863

10.95400

14

1.51259

0.66112

17.0863

11.29607

17.5989

11.63496

15

1.55797

0.64186

18.5989

11.93794

19.1569

12.29607

16

1.60471

0.62317

20.1569

12.56110

20.7616

12.93794

  

At the end of each quarter, Patti deposits $700 into an account that pays 12% interest compounded quarterly. How much will Patti have in the account in 4 years?

Answer 1

This is a question of future value of annuity:

Future value of annuity=Annuity amout*FV factor of annuity @ r rate for n periods

Where r=rate of interest per period i.e.3% per quarter

n= number of periods i.e.16 (i.e.4*4)

FV factor of annuity given in the table=20.1569

FV factor can also be calculated using the formula as given below.

FV factor of annuity= [(1+.03)^{^48}-1] / [.03]

=20.1569

Future value of annuity=700*20.1569

=14109.83

Hence deposit of 700 per quarter will become 14109.83 at the end of 4 years.

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