Future value of an annuity For each case in the accompanying table, answer the questions that follow.
Question:
Future value of an annuity For each case in the accompanying table, answer the questions that follow.
Case | Amount of annuity | Interest rate | Deposit period (years) |
---|---|---|---|
A | $ 2,500 | 8% | 10 |
B | 500 | 12 | 6 |
C | 30,000 | 20 | 5 |
D | 11,500 | 9 | 8 |
E | 6,000 | 14 | 30 |
Calculate the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity—ordinary or annuity due—is preferable? Explain why.
Problem 5-19: | ||||||
1. Annuity | ||||||
FUTURE VALUE OF AN ANNUITY | ||||||
A | B | C | D | E | ||
Annual payment | 2,500.00 | 500.00 | 30,000.00 | 11,500.00 | 6,000.00 | |
Interest Rate Per Year | 8% | 12% | 20% | 9% | 14% | |
Number of Years | 10 | 6 | 5 | 8 | 30 | |
Future value | ||||||
FUTURE VALUE OF AN ANNUITY DUE | ||||||
2. Annuity due | ||||||
FUTURE VALUE OF AN ANNUITY DUE | ||||||
A | B | C | D | E | ||
Annual payment | 2,500.00 | 500.00 | 30,000.00 | 11,500.00 | 6,000.00 | |
Interest Rate Per Year | 8% | 12% | 20% | 9% | 14% | |
Number of Years | 10 | 6 | 5 | 8 | 30 | |
Future value | ||||||
Statistics for the Life Sciences
ISBN: 978-0321989581
5th edition
Authors: Myra Samuels, Jeffrey Witmer, Andrew Schaffner