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    What is the future value of Janet Boyle's deposit?

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    P4-37 Annuities and compounding Janet Boyle intends to deposit $300 per year in a credit union for the next 10 years, and the credit union pays an annual interest rate of 8%.
    a. Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1) $300 is deposited annually and the credit union pays interest annually (2) $150 is deposited semiannually and the credit union pays interest semiannually (3) $75 is deposited quarterly and the credit union pays interest quarterly.
    b. Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.

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    Solution Preview

    P4-37
    P4-37 Annuities and compounding Janet Boyle intends to deposit $300 per year in a
    credit union for the next 10 years, and the credit union pays an annual interest
    rate of 8%.
    a. Determine the future value that Janet will have at the end of 10 years, given
    that end-of-period deposits are made and no interest is withdrawn, if

    (1) $300 is deposited annually and the credit union pays interest annually.

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

    Solution Summary

    This solution shows how to determine the future value that Janet will have at the end of 10 years with calculations and the answers and interpretation of the results.

    $2.19

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