# Annuity compounded annually

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1. Sep 28, 2005

### TonyC

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. Sep 28, 2005

### hotvette

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 $$\frac{1000[(1 + .045)^{18} - 1]}{.045}$$

The second is that it's not an annuity problem but rather a simple compound interest problem $$FV = PV(1+r)^m$$

3. Sep 29, 2005

### TonyC

Thank you very much.