Question

Assume you are planning to invest $7,923 each year for six years and will earn 10 percent per year. Determine the future value of this annuity due problem if your first $7,923 is invested now. (Round answer to 0 decimal places.)

Answer 1

Answer:

$67243.85

Explanation:

The first step is to determine the present value of the cash flows

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 0 to 5 = $7,923

I = 10%

PV  = 37957.40

The formula for calculating future value:

FV = P (1 + r) n

FV = Future value  

P = Present value  

R = interest rate  

N = number of years  

37957.40(1.1^6) =

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute