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Annuity compounded annually 
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#1
Sep2805, 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 P=1000 r=i/n i=4.5% or .045 n=1 t=18 m=n(t) or 18 1000[1 + .045)^18  1/.045 I know this is incorrect because my choices are multiple choice 


#2
Sep2805, 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] 


#3
Sep2905, 12:43 AM

P: 86

Thank you very much.



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