What's the future value of a 7 percent, 5 year ordinary annuity that pays $300 each year? If this were annuity due, what would its future value Be?
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What's the future value of a 7 percent, 5 year ordinary annuity that pays $300 each year? If this were annuity due, what would its future value Be?
Where i = interest per compounding period, and n = total number of compounding periods.
Since yours is annual, i just equals the yearly interest rate and n equals the years.
That is the equation, but I don't know how you need to solve it. This can be done with charts, financial calculators and Excel.
I don't remember the adjustment for an annuity due cause I never do them. I think you add one to n, and then subtract one payment from the final answer. If I have time, I'll try to look that up if someone doesn't beat me to it.
= 300[((1 + 0.07)5-1)/0.07]
= 1725.22
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