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

Accumulation option, It is a policy feature of permanent life insurance tha...

It is a policy feature of permanent life insurance that permits policyholders to left any dividends obtained with the insurer, where the dividends can gain interest. Accumulation o

Historical look at the treasury yield curve, The minimum interest rate ...

The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market particip

Explain about the interest payments, Explain about the Interest payments ...

Explain about the Interest payments Debenture interest is generally paid semi-annually however annual payments aren't uncommon.  Usually there are registered debentures on whic

Leverages, Evaluate the importance of leverages in financial management of ...

Evaluate the importance of leverages in financial management of small scale companies

Determine the expected net present, Karl Robinson is about to make his firs...

Karl Robinson is about to make his first major decision as president and chief executive officer of Conway Control & Instrument Corporation, a manufacturer of electronic test instr

Asset depreciation range, Work out and submit the comprehensive problem bel...

Work out and submit the comprehensive problem below. Halstrom Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation

Caselet 2, SUGGESTION REGARDING CREDIT LIMIT. SHOULD IT BE APPROVED OR NOT,...

SUGGESTION REGARDING CREDIT LIMIT. SHOULD IT BE APPROVED OR NOT, WHAT SHOULD BE THE AMOUNT OF CREDIT LIMIT THAT ELECTRONICS GIVE TO BOOTH PLASTICS

What are the types of theft threats, What are the types of theft threats?  ...

What are the types of theft threats?  Describe the methods to access and overcome theft threats. Types of theft threats - Mass theft, Pilferage theft. Steps to assess threats

Define the finance function, Q. Define the finance function? Is it a risk-r...

Q. Define the finance function? Is it a risk-return trade off? What is the basic role of a modern financial manager? What is the basic importance of finance function in the mana

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