Find the future value of an annuity when payment is $4000.00 annually, interest is 0.5% compounded annually and he term is 5 years.
Find the future value of an annuity when payment is $4000.00 annually, interest is 10.5% compounded annually and he term is 5 years.
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amount = 4000( 1.105^5 - 1)/.105
= ...
To find the future value of an annuity, you can use the formula:
FV = PMT * [((1 + r)^n) - 1] / r
where:
FV = Future Value
PMT = Payment amount per period
r = Interest rate per period
n = Number of periods
In this case, the payment amount per period (PMT) is $4000, the interest rate per period (r) is 0.5% (or 0.005 as a decimal), and the number of periods (n) is 5 years.
Plugging these values into the formula, we get:
FV = $4000 * [((1 + 0.005)^5) - 1] / 0.005
Now, let's calculate it step by step:
Step 1: Calculate the value inside the brackets:
(1 + 0.005)^5 = 1.0025^5 ≈ 1.0126
Step 2: Subtract 1 from the result:
1.0126 - 1 ≈ 0.0126
Step 3: Divide this result by the interest rate:
0.0126 / 0.005 = 2.52
Step 4: Multiply the payment amount by the result:
$4000 * 2.52 = $10,080
Therefore, the future value of the annuity, after 5 years, with a payment of $4000 annually and an interest rate of 0.5% compounded annually, is approximately $10,080.