Given the time-value of money of 11% compounded annually, calculate the term of an ordinary annuity of $425 monthly payments with a future value of $37,725.

Question

Quizplus · Accepted Answer

To find the term of the annuity, we use the future value of an annuity formula: FV = Pmt * [((1 + r)^n - 1) / r], where FV is the future value, Pmt is the payment, r is the interest rate per period, and n is the number of periods. Here, FV = $37,725, Pmt = $425, and r = 11%/12 per month. Solving for n gives approximately 66 months, which is 5.5 years.

Given the Time-Value of Money of 11% Compounded Annually, Calculate