What's the future value of a 10%, 5-year ordinary annuity that pays $600 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations

Finance Sep 23, 2020

What's the future value of a 10%, 5-year ordinary annuity that pays $600 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent. Future Value of an Ordinary Annuity: $ Future Value of an Annuity Due: $

Expert Solution

Future value of ordinary annuity:

=Annuity { (1+ rate) ^ time period - 1 } / rate

= 600 {( 1 + 0.1) ^ 5 - 1 } / 0.1

= 600 * 6.1051

= $ 3663.06

Future value of annuity due:

= Future value of annuity * ( 1 + rate)

= 3663.06 * (?1+ 10%)

= 4029.37

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