Register to reply

Annuity compounded annually

by TonyC
Tags: annually, annuity, compounded
Share this thread:
Sep28-05, 07:24 AM
P: 86
I am having trouble with the following problem:
What will be the value of an annuity in today's dollars if $1000 is to be deposited for 18 years into an account paying 4.5% interest compounded annually?

I used the following formula (I'm guessing I've figured something incorrectly)

A= P[(1 + r)^m - 1]/r

i=4.5% or .045
m=n(t) or 18

1000[1 + .045)^18 - 1/.045

I know this is incorrect because my choices are multiple choice
Phys.Org News Partner Science news on
Pilot sites in energy from coffee waste show good results
Startups offer banking for smartphone users
Factor in naked mole rat's cells enhances protein integrity
Sep28-05, 03:22 PM
HW Helper
P: 925
There are a couple of possibilities. One, your last equation either has a typo or you did it wrong:

1000[1 + .045)^18 - 1/.045 ==> should be [tex]\frac{1000[(1 + .045)^{18} - 1]}{.045}[/tex]

The second is that it's not an annuity problem but rather a simple compound interest problem [tex]FV = PV(1+r)^m[/tex]
Sep29-05, 12:43 AM
P: 86
Thank you very much.

Register to reply

Related Discussions
Interest calculated daily compounded monthly General Math 5
Continuously Compounded Interest and Diving. Calculus 2
Finding the Present Value Compounded Monthly Precalculus Mathematics Homework 1
Which annuity formula to use? Precalculus Mathematics Homework 7
FINANCIAL MATH: Question on Compounding Interest Semi-annually General Math 2