Question

e cumulative annuity payments over that time period Use the siders to change the irnterest rate, the payment per period, or the number of The upper (red) line depicts the future value of the ordinary annuity for the specifed time period The lower (blue) ine depicts perlods and observe how the future value of the annuity changes. $1000.050-S315.25 FVAy PMT Future Value of Annuity 500 400 300 200 101 Period Int 5 10 PMT 100 200 400 N-3 5 10 1. What is the approximate future value of an annuity after 10 years with payments each period of $200, and an interest rate of 6%? a. $1,257.59 b. $2,515.58 c. $2,636.16 d. $3,187.48 2. Set the sliders so that the interest rate is 5%, the payment is $100, and the number of periods is 3. If the interest rate doubles from 5% to 10%, the future value of the annuity: a. Increases but by less than double b. Exactly doubles c. Increases by more than double d. Cannot be determined -Select 3. Again, set the sliders so that the interest rate is 5%, the payment is $100, and the number of periods is 3. If the payment doubles from $100 to $200, the future value the annuity: a. Increases but by less than double b. Exactly doubles c. Increases by more than double d. Cannot be determined -Salact 4. Again, set the sliders so that the interest rate is 5%, the payment is $100, and the number of periods is 3. If the number of periods doubles from 3 to 6, the future value of the annuity: a. Increases but by less than double b. Exactly doubles c. Increases by more than double d. Cannot be determined -Select

Answer 1

(1) Tenure = 10 years, Annuity Payments = $ 200, Interest Rate = 6 %

Approximate Future Value = 200 x (1.06)^(9) + 200 x (1.06)^(8) + 200 x (1.06)^(7) + .........+ 200 x (1.06) + 200 = 200 x [{(1.06)^(10)-1} / {1.06 - 1}] = 200 x 2636.16

Hence, the correct option is (c)

NOTE: Please raise separate queries for solutions to the remaining unrelated questions,as one query is restricted to the solution of only one complete question with up to four sub-parts.