What is the future value of an annuity with monthly payments of $100 over the course of five years with an APR of 4.5 percent?
Round the answer to the nearest hundredth. (1 point)
The future value of an annuity formula is:
FV = Pmt * [(1 - (1 + r)^-n) / r]
Where:
FV = future value of the annuity
Pmt = monthly payment amount ($100)
r = monthly interest rate (APR/12 = 0.045/12 = 0.00375)
n = total number of payments (5 years * 12 months = 60)
FV = $100 * [(1 - (1 + 0.00375)^-60) / 0.00375]
FV = $100 * [(1 - (1.00375)^-60) / 0.00375]
FV ≈ $100 * [(1 - 0.648453) / 0.00375]
FV ≈ $100 * [0.351547 / 0.00375]
FV ≈ $100 * 93.87867
FV ≈ $9,387.87
Therefore, the future value of an annuity with monthly payments of $100 over five years with an APR of 4.5 percent is approximately $9,387.87.