Explanation Given: The given condition is, The monthly payment of $ 230 at 6.25 % interest rate with twenty-year ordinary annuity. Formula used: Future value of an ordinary annuity with payment size p y m t , periodic rate i , and a term of n payments is, F V ( ord ) = p y m t [ ( 1 + i ) n − 1 ] i Calculation: Consider the given condition, The monthly payment of $ 230 at 6.25 % interest rate with twenty-year ordinary annuity So the values are, p y m t = 230 And, n = 20 ⋅ 12 = 240 And, i = 1 12 ⋅ ( 6.25 % ) = 1 12 ⋅ 6.25 100 = 0.0625 12 Now, apply the formula and substitute the above values. F V ( ord ) = 230 [ ( 1 + 0.0625 12 ) 240 − 1 ] 0

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Author: David B. Johnson, Thomas A. Mowry

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The future value for the given condition.