Question
What is the amount of an annuity if the payments are $60 at the end of each month for 10 years at 3.5% interest computed monthly?
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Answer to a math question What is the amount of an annuity if the payments are $60 at the end of each month for 10 years at 3.5% interest computed monthly?
Clarabelle
4.794 Answers
Solution:
1. Determine the number of payments and the interest rate per period:
- Number of payments:n = 10 \times 12 = 120
- Monthly interest rate:i = \frac{3.5\%}{12} = 0.0029167
2. Use the formula for the future value of an ordinary annuity:
- Formula:FV = R \times \frac{(1 + i)^n - 1}{i}
- Where:
-R = 60
-i = 0.0029167
-n = 120
3. Calculate:
- Substitute values:
FV = 60 \times \frac{(1 + 0.0029167)^{120} - 1}{0.0029167}
FV\approx8605.95
4. Conclusion:
- The future value of the annuity is approximately USD 8605.95.
1. Determine the number of payments and the interest rate per period:
- Number of payments:
- Monthly interest rate:
2. Use the formula for the future value of an ordinary annuity:
- Formula:
- Where:
-
-
-
3. Calculate:
- Substitute values:
4. Conclusion:
- The future value of the annuity is approximately USD 8605.95.
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