Find the future value of the following ordinary annuity. Paym R=$500, 7% interest compounded quarterly for 8 years What is the future value of the ordinary annuity? $ (Round to the nearest dollar as needed.)
Find the future value of the following ordinary annuity. Paym R=$500, 7% interest compounded quarterly for 8 years What is the future value of the ordinary annuity? $ (Round to the nearest dollar as needed.)
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 the following ordinary annuity. Payments are made and interest is compounded as given.
R = $500, 7% interest compounded quarterly for 8 years
What is the future value of the ordinary annuity?
$
(Round to the nearest dollar as needed.)
Expert Solution
Step 1
Introduction:
An ordinary annuity is a series of equal payments made at the end of consecutive periods over a specified period. Ordinary annuities can be paid weekly, but in practice, they are generally paid monthly, quarterly, semi-annually, or annually. If interest rates rise, the value of a regular annuity will fall, and vice versa. The reason for these fluctuations is that the present value of future cash payment streams depends on the interest rate used in the present value formula. If the time value of money changes, the valuation of an annuity will also change.
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