What is the future value of an ordinary annuity of $12,000 per
year, for three years, at 9% interest compounded annually?
evaluate
12000(1.09^3 - 1)/.09
To calculate the future value of an ordinary annuity, you can use the formula:
Future Value = (Payment per period) * ((1 + Interest Rate)^(Number of periods) - 1) / Interest Rate
In this case, the payment per period is $12,000, the interest rate is 9%, and the number of periods is 3 years.
Plugging in the values into the formula:
Future Value = $12,000 * ((1 + 0.09)^(3) - 1) / 0.09
Now, let's solve the equation step by step:
1. Starting with the expression inside the parentheses: (1 + 0.09)^(3) = 1.09^3 = 1.295029
2. Subtracting 1 from the result: 1.295029 - 1 = 0.295029
3. Dividing the result from step 2 by the interest rate: 0.295029 / 0.09 = 3.2781
4. Multiplying the payment per period by the result from step 3: $12,000 * 3.2781 = $39,337.20
Therefore, the future value of an ordinary annuity of $12,000 per year, for three years, at a 9% interest rate compounded annually is approximately $39,337.20.