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Future Value of Annuities: Ordinary Annuity and Annuity Due

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Find the future value of the following annuities. The first payment in these annuities is made at the end of year one. That is, they are are ordinary annuities.

A) $400 per years for 10 years at 10%
B) $200 per year for 5 years at 5%
C) $400 per year for 5 years at 5%
D) Now rework parts a and b and c assuming that payments are made at the beginning of each year; that is they are annuities due

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Find the future value of the following annuities. The first payment in these annuities is made at the end of year one. that is, they are are ordinary annuities.

A) $400 per years for 10 years at 10%

FVA = W x (1 + i)n - 1 where FVA is the future value
i W is the amount required to deposit ...

Solution Summary

This solution is comprised of a detailed explanation to a multiple choice question about calculating the future value of the following annuities.

$2.19
See Also This Related BrainMass Solution

Calculating Future Value of ordinary annuity and annuity due

Future Value of annuity : For each case in the accompanying table, answer the question that follow.
Amount of Interest Deposit period
Case annuity rate (years)
A $ 2,500 8% 10
B 500 12 6
C 30,000 20 5
D 11,500 9 8
E 6,000 14 30

a. Calculate the future value of the annuity assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. Compare your finding in parts a (1) and a (2). All else being identical, which type of annuity - ordinary or annuity due - is preferable? Explain why?

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