Find the future value of an ordinary annuity if payments are made in the amount R...

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Find the future value of an ordinary annuity if payments are made in the amount R...

Find the future value of an ordinary annuity if payments are made in the amount R and interest is compounded as given. Then determine how much of this value is from contributions and how much is from interest. R;500 6.32% interest compounded semiannually for 12 years.

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Answer 1

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Answer #1

Future value of annuity = PMT * (1 +R)^N - 1) / R

where PMT = 500, R = 6.32%/2 = 0.0316 and N = 12 *2 = 24

= 500 * ((1 + 0.0316)^24-1) / 0.0316

= 17562.49

Total contribution = 500 * 24 = 12000

Total interest = 17562.49 - 12000 = 5562.49

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Answer 2

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