Question

5. Choose the best answer

Calculate the future value of the following variable and ordinary annuities, if the interest rate is 7% for all

1st year annuity: 10,000

2nd Annuity: 8000

3rd Annuity: 6000

4th Annuity: 5000

Annuity 5th: 4000

6th Annuity: 3000

Annuity 7th: 2000

Possible answers:

$ 47,087.40

$ 45,087.40

$ 48,087.40

$ 44,087.40

Answer 1

FV = [Payment(i) * (1 + r)^{(n - i)}]

22 i=1

= [$10,000 * (1 + 0.07)^(7-1)] + [$8,000 * (1 + 0.07)^(7-2)] + [$6,000 * (1 + 0.07)^(7-3)] + [$5,000 * (1 + 0.07)^(7-4)] + [$4,000 * (1 + 0.07)^(7-5)] + [$3,000 * (1 + 0.07)^(7-6)] + [$2,000 * (1 + 0.07)^(7-7)]

= $15,007.30 + $11,220.41 + $7,864.78 + $6,125.22 + $4,579.60 + $3,210 + $2,000

= $50,007.31