Explore BrainMass

# Future Value of an Annuity

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

To save money, you want to begin contributing money to a risky brokerage account. Your plan is to make 4 contributions to the brokerage account. Each contribution will be \$5,000 and each will be made at the beginning of each quarter beginning now and until the end of the year (the first immediately and then every 3 months). Assume that the account pays an 8% quarterly return with monthly compounding. How much money do you expect to have in the account immediately after making the last deposit?
a)20,938.67 b)19,784.21 c)19,021.54
d)26,546.36 e)25,369,14 f)22,602.32
g)22,215.54 h)23,598.54 i)24,879.73
j)21,791.64

Â© BrainMass Inc. brainmass.com December 24, 2021, 5:06 pm ad1c9bdddf

## SOLUTION This solution is FREE courtesy of BrainMass!

Quarterly interest rate= 8%
Therefore monthly interest rate with monthly compounding= 2.6667% =8%/3)

Compounding rate= 2.6667%
Quarter Dposit at the beginning of Month No of months for which cash is invested FV factor Cash deposit FV of cash flow at the beginning of fourth quarter
1 1 9 1.267262 5000 6336.31
2 4 6 1.171056 5000 5855.28
3 7 3 1.082153 5000 5410.77
4 10 0 1 5000 5000.00
Total= 22602.36

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Â© BrainMass Inc. brainmass.com December 24, 2021, 5:06 pm ad1c9bdddf>