How to calculate the future value of an annuity, Financial Management

Assignment Help:

Calculate the Future Value of an Annuity:

Annuity is stated as periodic payment every period for a number of periods. This periodic payment is the same each year only then it could be known as an annuity. Compound value (future value) of this annuity can be computed by using a different formula:

2257_Annuity.png

Here A is the constant periodic cash flow (annuity), i is the rate of return for one period and n is the number of time periods. Term within the brackets is the compound value factor of an annuity.  We may also use the tables given at the end of the text book to calculate compound values of the cash flows and formula would change to:

Future Value = Annuity * (Future Value Annuity Factorn,i)

Extending the same illustration we used above, if we were going to pay 7000 $each year for the next 20 years what is the value at the end of 20 years if interest rate was 5 % compounded annually.

 


Related Discussions:- How to calculate the future value of an annuity

Lockbox system, how do we compute for benefits can derrive out of using loc...

how do we compute for benefits can derrive out of using lockbox system?

Financial management assignment, You have just had your 30 th birthday. Yo...

You have just had your 30 th birthday. You have two children. One will go to college 12 years from now and require four yearly payments for college expenses of RM11,000, RM12,000

Evolution of hedge funds, Evolution of Hedge Funds: The establishment o...

Evolution of Hedge Funds: The establishment of the first Hedge Fund in the United States in the year 1949 by Alfred W. Jones marked the evolution of Hedge Fund industry. It was

Funds management, who are the participants in the hedge funds industries

who are the participants in the hedge funds industries

Fixed weight aggregates method - fisher''s ideal method, Fixed Weight Aggre...

Fixed Weight Aggregates Method In fixed weight aggregates method, the weights used are neither from base period nor from current period but from a representative period. These

Operating cycle, discuss the applicability of operating cycle and any other...

discuss the applicability of operating cycle and any other financial knowledge to poultry business in uganda

Award and signing of contract, A w ard of contract In previous sub se...

A w ard of contract In previous sub section you learnt in what situations you can negotiate. Now let us discuss the procedure for awarding the contract. Below are the step

Portfolio construction based on a factor model, Bond management evolution t...

Bond management evolution to some extent is linked to the increased volatility of the interest rate term structures which is in existence since seventies. Bond valuatio

What is inherent risk, What is Inherent risk Susceptibility  of  an  ac...

What is Inherent risk Susceptibility  of  an  account  balance  or  class  of  transactions  to  material  misstatement either  individually  or  when  aggregated  with misstat

Inflated budgeted expense account, Write down what processes and data you w...

Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements you could include to ensure that the problem would be l

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd