Future value of annuity of $500 for a year for 8 years at 14% Annuity: It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

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Answer 1

Question

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

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Answer 2

Question

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

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Answer 3

Question

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

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Answer 4

Question

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

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Answer 5

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

Answer 6

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Conclusion

Hence, the future value of annuity is $6,605.

Answer 7

Chapter 5, Problem 14P

a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 8

a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

The formula to calculate value of annuity is equation (I).

FVAnnuity=C×((1+i)n-1i)

Here,

FV stands for future value.
C is for monthly payment.
I is interest rate.
n stands for no of payments.

Substitute $500 for C, 0.14 , n for 8 years in equation (I)

FV=$500((1+0.14)8−10.14)=$500×1.850.14=$500×13.21=$6,605

The annuity is $6,605.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

Hence, the future value of annuity is $6,605.

Answer 13

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Conclusion

The future value of annuity will be $1,110.

Answer 14

(b)

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 15

(b)

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute $250 for C, 0.07 , n for 4 years in equation (I)

FV=$250((1+0.07)4−10.07)=$250×0.3110.07=$250×4.44=$1,110.

Answer 16

(b)

Expert Solution

Answer 17

(b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Conclusion

The future value of annuity will be $1,110.

Answer 20

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Conclusion

The future value of annuity will be $3500

Answer 21

(c)

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 22

(c)

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The formula to calculate the future value of an annuity when interest rate is 0,

FV=C×∑(1+i)n

Substitute $700 for C, 0.00 for r, n for 4 years.

FV=$700×((1+0.00)4+(1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)=700×5=3500

Answer 23

(c)

Expert Solution

Answer 24

(c)

Expert Solution

Answer 25

Expert Solution

Answer 26

Conclusion

The future value of annuity will be $3500

Answer 27

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

Answer 28

(d)

Summary Introduction

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 29

(d)

Expert Solution

Explanation of Solution

The formula to calculate future value of annuity due,

FVAnnuity=C((1+i)n−1i)×(1+i)

Were,

FV stands for future value of annuity.
C symbolizes the monthly payment.
I is for interest rate.
N is for number of payments.

Answer 30

(d)

Expert Solution

Answer 31

(d)

Expert Solution

Answer 32

Expert Solution

Answer 33

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Conclusion

The future value of annuity due is $7,545.

Answer 34

d.a.

Summary Introduction

To calculate: Future value of annuity of $500 for a year for 8 years at 14%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 35

d.a.

Expert Solution

Explanation of Solution

Given,

The annuity is $500 per year.

The interest rate is 14% or 0.14.

The numbers of years are 8 years.

Substitute C for $500, i for 14%, n for 8 years in equation {(d) I}

FV=$500×((1+0.14)8−1)0.14×(1+0.14)=$500×15.09=$7,545

Answer 36

d.a.

Expert Solution

Answer 37

d.a.

Expert Solution

Answer 38

Expert Solution

Answer 39

Conclusion

The future value of annuity due is $7,545.

Answer 40

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Conclusion

The future value of annuity due is $1,187.68.

Answer 41

d.b

Summary Introduction

To calculate: Future value of annuity of $250 for a year for 4 years at 7%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 42

d.b

Expert Solution

Explanation of Solution

Given,

The annuity is $250 per year.

The interest rate is 7%.

The numbers of years are 4 years.

Substitute C for $250, I for 7%, n for 4 years.

FV=$250((1+0.07)4−1)0.07×(1+0.07)=$250×4.75=$1,187.68

Answer 43

d.b

Expert Solution

Answer 44

d.b

Expert Solution

Answer 45

Expert Solution

Answer 46

Conclusion

The future value of annuity due is $1,187.68.

Answer 47

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Conclusion

The future value of annuity due is $3,500.

Answer 48

d.c

Summary Introduction

To calculate: Future value of annuity of $700 for a year for 4 years at 0%

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Answer 49

d.c

Expert Solution

Explanation of Solution

Given,

The annuity is $700 per year.

The interest rate is 0%.

The numbers of years are 4 years.

The following formula will be used to solve.

FVAnnuity=C×∑(1+i)n×(1+i)

Substitute C for $700, i for 0%, n for 4 years in equation.

FV=$700×((1+0.00)3+(1+0.00)2+(1+0.00)1+(1+0.00)0)×(1+0.00)=700×5=3,500

Answer 50

d.c

Expert Solution

Answer 51

d.c

Expert Solution

Answer 52

Expert Solution

Answer 53

Conclusion

The future value of annuity due is $3,500.

Answer 54

Ch. 5 - Prob. 1Q Ch. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Prob. 4Q Ch. 5 - Prob. 5Q Ch. 5 - The present value of a perpetuity is equal to the...Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - What is a loan amortization schedule, and what are...Ch. 5 - FUTURE VALUE If you deposit 2,000 in a bank...Ch. 5 - Prob. 2P

Explanation of Solution

Explanation of Solution

Explanation of Solution

To rework: Part a, b and c as they are due. Annuity: It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.

Explanation of Solution

Explanation of Solution

Explanation of Solution

Explanation of Solution

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Chapter 5 Solutions

To rework: Part a, b and c as they are due.

Annuity:

It is an agreement under which person pays the lump sum payment or number of small payments and in return gets the amount at later date or upon annuitization. The purpose of the annuity is not to break the flow of income after retirement.