The future value of an ordinary annuity of 1,000 each year for ten years, deposited at 3 percent, is
A. 11,808
B. 8,530
C. 11,464
D. 10,000
11464
To find the future value of an ordinary annuity, you can use the formula:
Future Value = Payment × [(1 + Interest Rate)^Number of Periods - 1] / Interest Rate
Given:
Payment = $1,000
Interest Rate = 3% or 0.03
Number of Periods = 10 years
Plugging the values into the formula:
Future Value = $1,000 × [(1 + 0.03)^10 - 1] / 0.03
Calculating the expression inside the brackets:
Future Value = $1,000 × [(1.03)^10 - 1] / 0.03
Future Value = $1,000 × [1.343916379 - 1] / 0.03
Future Value = $1,000 × 0.343916379 / 0.03
Future Value = $11,800.02
Therefore, the future value of an ordinary annuity of $1,000 each year for ten years, deposited at 3 percent, is approximately $11,800. The closest option is A. 11,808.
To calculate the future value of an ordinary annuity, we can use the formula:
FV = P * [(1+r)^n - 1] / r
Where:
FV = Future Value
P = Payment amount per period
r = Interest rate per period
n = Number of periods
In this case, the payment amount (P) is $1,000, the interest rate (r) is 3% or 0.03, and the number of periods (n) is 10.
Let's substitute these values into the formula:
FV = 1000 * [(1+0.03)^10 - 1] / 0.03
Calculating this, we find:
FV ≈ 1000 * [1.34392 - 1] / 0.03
FV ≈ 1000 * (0.34392) / 0.03
FV ≈ 1000 * 11.464
FV ≈ 11,464
Therefore, the future value of an ordinary annuity of $1,000 each year for ten years, deposited at a 3% interest rate, is $11,464.
So, the correct answer is C. 11,464.