Question

1.What is the future value of $510 per year for 8 years compounded annually at 11 percent? The future value of $510 per year for 8 years compounded annually at 11 percent is $_ (Round to the nearest cent.)

2. What is the present value of $2,500 per year for 10 years discounted back to the present at 11 percent? The present value of $2,500 per year for 10 years discounted back to the present at 11 percent is $_ (Round to the nearest cent.)

Answer 1

1.Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=510[(1.11)^8-1]/0.11

=510*11.85943427

=$6048.31(Approx).

2.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=2500[1-(1.11)^-10]/0.11

=2500*5.889232011

=$14723.08(Approx).