An annuity pays $50 per year for 20 years.What is the future value (FV)of this annuity at the end of those 20 years,given that the discount rate is 7%?

Question

Quizplus · Accepted Answer

The future value of an annuity is the sum of the present values of each of the payments. The present value of each payment is the payment divided by (1 + r)^n, where r is the discount rate and n is the number of years from the payment to the end of the annuity. In this case, the present value of each payment is $50 / (1 + 0.07)^n. The future value of the annuity is the sum of the present values of each of the payments, which is $50 * (1 - (1 + 0.07)^-20) / 0.07 = $2049.77.

An Annuity Pays $50 Per Year for 20 Years