Purchase Solution

# Find future fund value and also simple interest formula

Not what you're looking for?

What does it mean if the investment sales literature states that the future fund value of an ordinary annuity is determined using the simple interest formula method? Explain what this means and also illustrate this by devising a calculation. (Assume that you have 20 years until you retire).
What is the difference of a between an ordinary annuity and an annuity due? Compare the annuity due to the money you invested in the ordinary annuity. Illustrate this by devising a calculation. (Assume that you have 20 years until you retire). (Use the variables you created for the simple interest formula method).
Using a formula, calculate the present value of this ordinary annuity.

##### Solution Summary

The solution provides very detailed explanations and step-by-step calculations.

##### Solution Preview

Part 1: Future value of annuity
Generally, interest can be calculated using simple interest formula.
The simple interest, I, for t years on an amount of P dollars at a rate of interest r per year for t years is:
I=rPt
Where
I = Interest
P = Principal
r = Interest rate expressed as a decimal
t = Time.

Assuming interest compounded annually, the future value or maturity value, A, of P dollars for t years at a rate of interest of r per year is
A = P(1 + rt).

But this is considering only one payment. For annuity, we have yearly payment. The future value of this annuity can be calculated using the following formula:
FV=C*((1+i)^n -1)/i
FV= Future value of ...

##### Free BrainMass Quizzes

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

##### Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

##### Introduction to Finance

This quiz test introductory finance topics.

##### Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

##### Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.