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# Calculating future and present values of ordinary annuities

Problem 1
If interest rates are 8 percent, what is the future value of a \$400 annuity payment over six years? Unless otherwise directed, assume annual compounding periods.
- Recalculate the future value at 6 percent interest and 9 percent interest.

Problem 2
If interest rates are 5 percent, what is the present value of a \$900 annuity payment over three years? Unless otherwise directed, assume annual compounding periods.
- Recalculate the present value at 10 percent interest and 13 percent interest.

Problem 3
What is the present value of a series of \$1150 payments made every year for 14 years when the discount rate is 9 percent?
- Recalculate the present value using discount rate of 11 percent and 12 percent.

#### Solution Preview

Problem 1
If interest rates are 8 percent, what is the future value of a \$400 annuity payment over six years? Unless otherwise directed, assume annual compounding periods.
Periodic Deposit=R=\$400
Number of periods=n=6
Rate of interest=i=8%

Future Value of ordinary annuity=FV=R/i*((1+i)^n-1)=400/8%*((1+8%)^6-1)=\$ 2934.37

-Recalculate the future value at 6 percent interest and 9 percent interest.
If Rate of interest=i=6%
Future Value of ...

#### Solution Summary

The solution depicts the methodology to calculate the present and future values of ordinary annuities. Calculations are carried out with the help of suitable formulas.

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