Question

find the future value accumulated in a annuity after investing periodic payments of $109 for 7 years at annual interest rate of 6.25% with payments made and credited four times per year

Answer 1

Let the periodic payment be P

Let the interest rate be R

Let the number of period be T

Let the future value be FV

$FV\text{ = P (}\frac{(1+R)^T\text{ - 1}}{R})$$\begin{gathered} \text{ P= \ 109 , R = 6.25\% , T = 7} \\ \text{ FV = 109 (}\frac{(1+0.0625)^{28}-\text{ 1}}{0.0625}) \end{gathered}$$\begin{gathered} \text{ = 109 (}\frac{4.46}{0.0625}) \\ \text{ = 109 }\times71.36\text{ =\ }7778.24 \end{gathered}$