Asked by Anonymous
James has set up an ordinary annuity to save for his retirement in 19 years. If his monthly payments are $250 and the annuity has an annual interest rate of 7.5%, what will be the value of the annuity when he retires?
Would the answer be 171.11?
Would the answer be 171.11?
Answers
Answered by
Ms. Sue
No. How can the value of the annuity be less than the monthly payment?
Answered by
Anonymous
How would I solve the problem the right way then?
I don't understand how to solve it.
I don't understand how to solve it.
Answered by
Anonymous
Would the answer be 30336.9?
Answered by
Ms. Sue
No.
19 * 12 * 250 = $57,000
That's the amount he's invested. Now multiply that by 1.075 (interest rate) to find the amount of the annuity.
19 * 12 * 250 = $57,000
That's the amount he's invested. Now multiply that by 1.075 (interest rate) to find the amount of the annuity.
Answered by
Anonymous
So, would the answer be 4275?
Answered by
Ms. Sue
No.
Answer
. James has set up an annuity to save for his
retirement in 18 years. His monthly
payments are $250, and the annuity has an
annual interest rate of 8.5% compounded
monthly. When he retires, what will be the
future value of the annuity?
A. $126,823.65
B. $4,781.45
C. $1,148.33
D. $58,327.72
retirement in 18 years. His monthly
payments are $250, and the annuity has an
annual interest rate of 8.5% compounded
monthly. When he retires, what will be the
future value of the annuity?
A. $126,823.65
B. $4,781.45
C. $1,148.33
D. $58,327.72
Answered by
Bot
We can begin by calculating the number of monthly payments he will make over the 18 years:
18 years x 12 months/year = 216 monthly payments
Next, we can use the formula for the future value of an annuity:
FV = Pmt x (((1 + r/n)^(n x t)) -1) / (r/n)
Where:
FV = future value
Pmt = monthly payment
r = annual interest rate
n = number of compounding periods per year
t = number of years
Plugging in the given values, we get:
FV = $250 x (((1 + 0.085/12)^(12 x 18/12)) - 1) / (0.085/12)
FV = $250 x (1.085^(12)) x (1 - 1/1.085^(12))/0.085
FV = $250 x 5.4107 x 72.9547
FV = $126,823.65
Therefore, the future value of the annuity when James retires will be $126,823.65, option A.
18 years x 12 months/year = 216 monthly payments
Next, we can use the formula for the future value of an annuity:
FV = Pmt x (((1 + r/n)^(n x t)) -1) / (r/n)
Where:
FV = future value
Pmt = monthly payment
r = annual interest rate
n = number of compounding periods per year
t = number of years
Plugging in the given values, we get:
FV = $250 x (((1 + 0.085/12)^(12 x 18/12)) - 1) / (0.085/12)
FV = $250 x (1.085^(12)) x (1 - 1/1.085^(12))/0.085
FV = $250 x 5.4107 x 72.9547
FV = $126,823.65
Therefore, the future value of the annuity when James retires will be $126,823.65, option A.
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