МАЗА $50 is invested biweekly in an ordinary simple annuity, earning 3.5% interest per annum, compounded biweekly. What will the value of the annuity be in 10 years?

Question

asked Oct 2, 2021 105k views

1 Answer

Dog Lover · Answer 1 · 2021-10-08T22:35:27+0000

Answer:

The value of the annuity in 10 years will be US$ 15,552.90

Explanation:

Let's use the ordinary simple annuity formula to calculate the value of the annuity in 10 years, this way:

FV = Future value of an annuity stream

PMT = Dollar amount of each annuity payment = US% 50

r = Interest rate = 3.5% compounded biweekly = 0.035/26

n = Number of periods in which payments will be made = 26 * 10 = 260

FV = PMT * [(1 + r)ⁿ − 1]/r

Now, replacing with the real values, we have:

FV = 50 * [(1 + 0.035/26)²⁶⁰ − 1]/(0.035/26)

FV = 50 * [(1.001346154)²⁶⁰ − 1]/0.001346154

FV = 50 * 0.41873217/0.001346154

FV = 50 * 311.058148

FV = 15,552.90

We only rounded the last product to the next cent, in all the other cases we used all the decimals for the calculations.