what is the future value of an ordinary annuity of $90 paid at the end of each quarter for 2 years, if interest is earned at a rate of 7%, compounded quarterly.
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 per period
r = interest rate per period
n = number of periods
In this case:
P = $90
r = 7% or 0.07 (compounded quarterly)
n = 2 years * 4 quarters per year = 8 quarters
Using the formula:
FV = $90 * [(1 + 0.07)^8 - 1] / 0.07
FV = $90 * [1.718181 - 1] / 0.07
FV = $90 * 0.718181 / 0.07
FV ≈ $924.54
Therefore, the future value of the ordinary annuity of $90 paid at the end of each quarter for 2 years, with an interest rate of 7% compounded quarterly, is approximately $924.54.