Find the future value of a 12-year annuity due with payments of $3,000 and an annually compounded interest rate of 6%. The future value is $. (Round to the nearest cent.)
Find the future value of a 12-year annuity due with payments of $3,000 and an annually compounded interest rate of 6%. The future value is $. (Round to the nearest cent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Find the future value of a 12-year annuity due with payments of $3,000 and an annually compounded interest rate of
6%.
The future value is $. (Round to the nearest cent.)
Expert Solution
Concept:
The future value of an annuity due is the value of a series of equal payments made at the beginning of each period, rather than at the end of each period as in an ordinary annuity. It represents the future value of the payments, taking into account the effect of compounding interest. The formula for calculating the future value of an annuity due is:
Where:
- FV = future value
- PMT = payment amount
- r = interest rate
- n = number of payments or periods
In other words, the future value of an annuity due represents the amount that a series of equal payments, made at the beginning of each period, will grow to after a certain number of periods, given a specified interest rate. This formula can be used to calculate the future value of an annuity due, taking into account the timing of the payments.
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