Interest and Time Value of Money
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Find the future value of the following annuity.
$500 deposited at the end of each 6-month period for 8 years; money earns 6% compounded semiannually.
FVoa = PMT [((1 + i)n - 1) / i]
Where:
FVoa = Future Value of an Ordinary Annuity
PMT = Amount of each payment
i = Interest Rate Per Period
n = Number of Periods
PMT = 500, i = 6% / 2 = 3%, n = 8 * 2 = 16 compounding periods
So the future value is $10078.44.
Find the amount of each payment that must be made into a sinking fund to accumulate the following amount. (Recall, in a sinking fund, payments are made at the end of every interest period.)
$57,000; money earns 6% compounded semiannually for 8 ½ years.
In this problem, we know the future value of the ordinary ...
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