Peter deposits $500 at the END of every month for 3 years in a savings account. The account pays 12% interest, compounded monthly. Peter calculates that the future value of the ordinary annuity is $21,538.44. What would be the future value if deposits were made at the BEGINNING of each period rather than the END? (Calculate the future value by formula)
A) $21,753.83
B) $25,734.44
C) $22,273.44
D) $22,349.85

Question

Quizplus · Accepted Answer

To find the future value of an annuity due (deposits made at the beginning of each period), you can multiply the future value of an ordinary annuity by (1 + r), where r is the monthly interest rate. The monthly interest rate is 12% per year, or 1% per month (12%/12). The future value of the ordinary annuity is given as $21,538.44. Therefore, the future value of the annuity due is $21,538.44 * (1 + 0.01) = $21,753.83.

Peter Deposits $500 at the END of Every Month for 3