Question

Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% compounded annually. The value of Ted's annuity at the end of eight years is (use the tables in the handbook):

Answer 1

Answer:

The value of Ted's annuity at the end of eight years is $5318.3138.

Step-by-step explanation:

Given : Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% compounded annually.

To find : The value of Ted's annuity at the end of eight years ?

Solution :

The future value of an ordinary annuity is given by,

$FV=C[\frac{(1+i)^n-1}{i}]$

Where,

C is deposit amount C=$500

n is the number of payments n=8

i is the interest rate i=8%=0.08

Substitute the value in the formula,

$FV=500[\frac{(1+0.08)^{8}-1}{0.08}]$

$FV=500[\frac{(1.08)^{8}-1}{0.08}]$

$FV=500[\frac{0.8509}{0.08}]$

$FV=500[10.6366]$

$FV=5318.3138$

Therefore, the value of Ted's annuity at the end of eight years is $5318.3138.