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future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1) $300 is deposited annually and the credit union pays interest annually (2) $150 is deposited semiannually and the credit union pays interest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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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.
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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that end-of-period deposits are made and no interest is withdrawn, if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
...
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