Explanation Given: The periodic payment is R = 1250 , the interest rate is r = 5 % , and the annuity is for t = 18 years . Formula used: Future value of an ordinary annuity is S = R [ ( 1 + i ) n − 1 i ] . Where, S is the future value; R is the periodic payment; i is the interest rate per period; n is the number of periods. Calculation: Given that, the periodic payment is R = 1250 . The interest is compounded semiannually, then number of payments made in a year is m = 2 . It is given that the annuity is for t = 18 years . Hence, the number of periods is n = m t . That is, 2 × 18 = 36 . It is given that the interest rate is r = 5 % . Then the interest rate per period is, i = r m = 5 % 2 = 0.05 2 = 0.025 Use the above mentioned formula to obtain the future value of the ordinary annuity. Substitute R = 1250 , i = 0

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Chapter 5.2, Problem 22E

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Chapter 5.2, Problem 21E

Chapter 5.2, Problem 23E

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Chapter 5 Solutions

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The future value of the ordinary annuity and determine the value that is from contributions and interest.

Solution Summary: The author calculates the future value of an ordinary annuity by substituting the periodic payment, interest rate, and number of periods in the formula.

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Chapter 5 Solutions