What is the future value of the annuity stream, if the frequency of compounding is 2 times per year?

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
icon
Related questions
Question
You expect to make equal payments of $ 7390.00 at the end of each semi-annual
period over the next 9 years (ordinary annuity) into a new bank account earning
interest at 4 %.
What is the future value of the annuity stream, if the frequency of compounding is 2
times per year?
(Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00)
Transcribed Image Text:You expect to make equal payments of $ 7390.00 at the end of each semi-annual period over the next 9 years (ordinary annuity) into a new bank account earning interest at 4 %. What is the future value of the annuity stream, if the frequency of compounding is 2 times per year? (Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00)
Expert Solution
Step 1

Future Value of Annuity:

It refers to the future worth of the periodic payments made at the end of each period. 

Future value is calculated by compounding these periodic payments with an interest rate. The higher the rate of interest, the higher the future value of the annuity will be.

The concept of future value is used by many investors to know their portfolio worth.

 

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Types of Insurance Contract
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education