Find the future value of the ordinary annuity. Interest is compounded annually, unless otherwise indicated:
-PMT = $7,500, i = 7% interest compounded semiannually for 4 years
A) $ 131,254.61
B) $ 58,345.56
C) $ 67,887.65
D) $ 282,173.37

Question

Quizplus · Accepted Answer

The future value of an ordinary annuity can be calculated using the formula: $FV = PMT \times \frac{((1 + r)^n - 1)}{r}$, where PMT is the payment amount per period, r is the interest rate per period, and n is the total number of payments. Since the interest is compounded semiannually, the annual interest rate (7%) must be divided by 2, and the number of years (4) must be multiplied by 2, giving us an effective r of 0.035 and n of 8. Plugging these values into the formula gives us the future value of the annuity.

Find the Future Value of the Ordinary Annuity