Explanation Given Information: Annuity payment is $ 4 , 000 , frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8 % and interest is compounded quarterly. Formula used: Steps for calculating the future value of an ordinary annuity are: Step1: First the interest rate per period for the annuity is calculated. Step2: The number of annuity periods should then be determined. Step 3: Use table 12-1 to locate the ordinary annuity table factor that lies on the intersection of the rate-per period column and number-of-periods row. Step 4: Finally future value of the ordinary annuity is calculated. The formula to compute the future value of ordinary annuity is, Future Value = Ordinary annuity table factor × Annuity payment Calculation: Consider that annuity payment is $ 4 , 000 , frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8 % and interest is compounded quarterly. As the interest is compounded quarterly. So, the interest rate period is; 8 % 4 = 2 % The rate period is 2 %

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

8th Edition

ISBN: 9781337125468

Author: Brechner

Publisher: Cengage

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Chapter 12, Problem 1AT

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To calculate: The future value of ordinary annuities where annuity payment is $4,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly.

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Chapter 12, Problem 14CR

Chapter 12, Problem 2AT

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Chapter 12 Solutions

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

Ch. 12.I - Freeport Bank is paying 8% interest compounded...Ch. 12.I - Vista Savings Loan is paying 6% interest...Ch. 12.I - Katrina Byrd invested $250 at the end of every...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...

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The future value of ordinary annuities where annuity payment is $ 4 , 000 , frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8 % and interest is compounded quarterly.

Solution Summary: The author calculates the future value of an ordinary annuity by calculating the interest rate per period, nominal rate of return, and interest compounded quarterly.

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To calculate: The future value of ordinary annuities where annuity payment is $4,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly.

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Chapter 12 Solutions