Peter
will receive $1200 at the beginning of each of the next 7 years. What is the
future value of this annuity, assuming the interest rate is 9% compounded
annually? ( Round to the nearest whole dollar)

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Jun 23rd, 2015

The future value of 7 annual receipts of $1,200.00, received at the end of each period, and earning an annual interest rate of 9.000%, would be $11,040.52 -- of which $8,400.00 is the total of the receipts and $2,640.52 is the total interest earnings.

Please note that the $2,640.52 also represents the financial opportunity cost of spending $1,200.00 per year for 7 years on non-essential expenditures that lose their value with time and/or use.

Year

Receipts

Interest

Balance

1

$1,200.00

$0.00

$1,200.00

2

$1,200.00

$108.00

$2,508.00

3

$1,200.00

$225.72

$3,933.72

4

$1,200.00

$354.03

$5,487.75

5

$1,200.00

$493.90

$7,181.65

6

$1,200.00

$646.35

$9,028.00

7

$1,200.00

$812.52

$11,040.52

Totals

$8,400.00

$2,640.52

$11,040.52

FV = 11040.52

Jun 23rd, 2015

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