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Nancy Hernandez invested $5500 twice a year in an annuity due at Capital Appreciation, Inc
Nancy Hernandez invested $5500 twice a year in an annuity due at Capital Appreciation, Inc. for a period of 5 years at an interest rate of 8% compounded semiannually.
Using the ordinary annuity table, calculate the total value of the annuity due at the end of the 5-year period.
Expert Solution
Computation of Total Value of the annuity due at the end of the 5-year period using FV function in Excel:
=-fv(rate,nper,pmt,pv)
Here,
FV = Future Value or Total Value of the annuity due at the end of the 5-year period =?
Rate = 8%/2 = 4%
Nper = 5 Years*2 = 10 Periods
PMT = $5,500
PV = 0
Substituting the values in formula:
=-fv(4%,10,5500,0)
FV or Future Value or Total Value of the annuity due at the end of the 5-year period = $66,033.59
Or
Total Value of the annuity due at the end of the 5-year period = Cash Flows * FVAF(i,n)
= $5,500*12.00611
Total Value of the annuity due at the end of the 5-year period = $66,033.59
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