The formula to calculate the future value of an annuity is:
FV = Pmt * ((1 + r)^n - 1) / r
where:
FV = Future value of the annuity
Pmt = Monthly payment
r = Interest rate per period
n = Number of periods
In this case, the annual interest rate is 4 percent, so we need to find the monthly interest rate by dividing the annual interest rate by 12 (since there are 12 months in a year):
r = 4% / 12 = 0.04 / 12 = 0.0033333
Rounded to the nearest thousandth, the value of r that must be substituted into the formula is 0.003.
An annuity account earns monthly payments and has an annual interest rate of 4 percent. What value of r must be substituted into the formula to calculate the future value of the annuity? Round the value to the nearest thousandth. (1 point)
1 answer