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    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 ...

    Solution Summary

    This solution provides a detailed, step by step solution to the given finance problem.

    $2.19