Math Problem Statement
Use a calculator to evaluate an ordinary annuity formula A = m
1 + r n nt
− 1 r n
for m, r, and t (respectively). Assume monthly payments. (Round your answer to the nearest cent.) $100; 7%; 10 yr
Solution
The formula for the future value of an ordinary annuity is given as:
Where:
- is the monthly payment
- is the annual interest rate
- is the number of payments per year (12 for monthly payments)
- is the total time in years
Given values:
- (7% annual interest rate)
- (monthly payments)
- years
Let’s plug in these values and compute the future value .
I'll calculate this now.The future value of the ordinary annuity is $17,308.48 after 10 years, with monthly payments of $100 at an annual interest rate of 7%.
Would you like more details on how the calculation was performed or have any other questions?
Here are 5 related questions you might find interesting:
- How would the future value change if the interest rate increased to 8%?
- What is the difference between an ordinary annuity and an annuity due?
- How does the compounding frequency (monthly, quarterly, etc.) affect the future value?
- What is the formula for calculating the present value of an annuity?
- How would a lump sum investment compare to regular annuity payments?
Tip: In an ordinary annuity, payments are made at the end of each period, which can make a significant difference compared to annuity due.
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Math Problem Analysis
Mathematical Concepts
Finance
Annuities
Exponential Growth
Compound Interest
Formulas
A = m * [(1 + r/n)^(nt) - 1] / (r/n) (Ordinary Annuity Future Value Formula)
Theorems
Compound Interest Theorem
Suitable Grade Level
Undergraduate Finance / High School Advanced Math
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