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future value of an annuity

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You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

a. $18,369
b. $19,287
c. $20,251
d. $21,264
e. $22,327

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Solution Preview

Let's take a look the first saving of $3100.
With interst compounding yearly, its valua at the end of the 5th year is
A1 = P(1+i)^4
where p =$3100 is your principal ...

Solution Summary

It provides detailed steps of calculating the future value of an annuity.

$2.19
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Future Value of Annuities: Ordinary Annuity and Annuity Due

Find the future value of the following annuities. The first payment in these annuities is made at the end of year one. That is, they are are ordinary annuities.

A) $400 per years for 10 years at 10%
B) $200 per year for 5 years at 5%
C) $400 per year for 5 years at 5%
D) Now rework parts a and b and c assuming that payments are made at the beginning of each year; that is they are annuities due

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