an ordinary anuuity starting in three years with 20 quarterly payment of $400
What is your question?
To solve this problem, we need to calculate the future value of an ordinary annuity starting in three years with 20 quarterly payments of $400.
The formula to calculate the future value of an ordinary annuity is:
Future Value = Payment * [(1 + interest rate)^n - 1] / interest rate
In this case, the payments are made quarterly for a total of 20 payments, and the payment amount is $400.
To calculate the interest rate, we need to know the rate of return or interest rate for the investment. Let's assume it is 5% per year. In quarterly terms, the interest rate would be 5% / 4 = 1.25%.
Using the formula, we can calculate the future value as follows:
Future Value = $400 * [(1 + 0.0125)^20 - 1] / 0.0125
Future Value = $400 * [(1.0125)^20 - 1] / 0.0125
Calculating (1.0125)^20 and substituting it into the formula:
Future Value = $400 * [1.2653154 - 1] / 0.0125
Future Value = $400 * 0.2653154 / 0.0125
Future Value = $400 * 21.225232 / 0.0125
Future Value = $5,283.81
Therefore, the future value of the annuity starting in three years with 20 quarterly payments of $400, assuming a 5% annual interest rate, is approximately $5,283.81.