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Deposits of $88
Deposits of $88.00 are made at the end of every quarter for 9.25 years. What will the deposits amount to if interest is 9% compounded quarterly? The future value is $0 (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Expert Solution
FV of Annuity :
Annuity is series of cash flows that are deposited at regular intervals for specific period of time. Here deposits are made at the end of the period.
FV of annuity is future value of cash flows deposited at regular intervals grown at specified int rate or Growth rate to future date.
FV of Annuity = CF [ (1+r)^n - 1 ] / r
r - Int rate per period
n - No. of periods
| Particulars | Amount |
| Cash Flow | $ 88.00 |
| Int Rate | 2.2500% |
| Periods | 37 |
FV of Annuity = Cash Flow * [ [ ( 1 + r ) ^ n ] - 1 ] /r
= $ 88 * [ [ ( 1 + 0.0225 ) ^ 37 ] - 1 ] / 0.0225
= $ 88 * [ [ ( 1.0225 ) ^ 37 ] - 1 ] / 0.0225
= $ 88 * [ [2.2779] - 1 ] / 0.0225
= $ 88 * [1.2779] /0.0225
= $ 4998.17
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