Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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**Compound Interest Annuity Calculation**

**Task:**
Find the amount accumulated (FV) in the given annuity account. (Assume end-of-period deposits and compounding at the same intervals as deposits. Round your answer to the nearest cent.)

**Scenario:**
- $500 is deposited monthly for 10 years at an interest rate of 6% per year.
- The account starts with an initial amount of $9,000.

**Formula:**
FV (Future Value) = $__________

To solve this, use the future value formula for an annuity:

\[ FV = P \times \left( \frac{(1 + r)^n - 1}{r} \right) + PV \times (1 + r)^n \]

Where:
- \( P \) is the monthly deposit ($500)
- \( r \) is the monthly interest rate (annual rate/12 months = 0.06/12)
- \( n \) is the total number of deposits (12 months × 10 years = 120)
- \( PV \) is the initial principal ($9,000)

Calculate the future value based on these parameters.
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Transcribed Image Text:**Compound Interest Annuity Calculation** **Task:** Find the amount accumulated (FV) in the given annuity account. (Assume end-of-period deposits and compounding at the same intervals as deposits. Round your answer to the nearest cent.) **Scenario:** - $500 is deposited monthly for 10 years at an interest rate of 6% per year. - The account starts with an initial amount of $9,000. **Formula:** FV (Future Value) = $__________ To solve this, use the future value formula for an annuity: \[ FV = P \times \left( \frac{(1 + r)^n - 1}{r} \right) + PV \times (1 + r)^n \] Where: - \( P \) is the monthly deposit ($500) - \( r \) is the monthly interest rate (annual rate/12 months = 0.06/12) - \( n \) is the total number of deposits (12 months × 10 years = 120) - \( PV \) is the initial principal ($9,000) Calculate the future value based on these parameters.
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