Find the future value of an annuity due consisting of payments of $100 paid at the beginning of each quarter for five years at the rate of 5% compounded quarterly

Finance Dec 23, 2020

Find the future value of an annuity due consisting of payments of $100 paid at the beginning of each quarter for five years at the rate of 5% compounded quarterly. (Round your answer to nearest Dollar) $2,300 $2.325 c) 52,370 d $2.285 $2,315

Expert Solution

Quarterly rate = 5% / 4 = 1.25%

Number of periods = 5 * 4 = 20

Future value = (1 + rate) * Annuity * [(1 + rate)^periods - 1] / rate

Future value = (1 + 0.0125) * 100 * [(1 + 0.0125)^20 - 1] / 0.0125

Future value = 1.0125 * 100 * [1.28204 - 1] / 0.0125

Future value = 1.0125 * 100 * 22.56298

Future value = $2,285

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