13 t1 this factor is the multiplier used to calculate

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: rest rate over a given period of time. Using FVAn for the future value of an n-year annuity, PMT for the amount to be deposited annually at the end of each year, and FVIFAi,n for the appropriate future value interest factor for a one-dollar ordinary annuity compounded at i percent for n years, we can express the relationship among these variables alternatively as FVAn PMT (FVIFAi,n) (4.14) The following example illustrates this calculation using a table, a calculator, and a spreadsheet. EXAMPLE Input 1000 Function PMT 5 N 7 I CPT FV Solution 5750.74 As noted earlier, Fran Abrams wishes to find the future value (FVAn) at the end of 5 years (n) of an annual end-of-year deposit of $1,000 (PMT) into an account paying 7% annual interest (i) during the next 5 years. Table Use The future value interest factor for an ordinary 5-year annuity at 7% (FVIFA7%,5yrs), found in Table A–3, is 5.751. Using Equation 4.14, the $1,000 deposit 5.751 results in a future value for the annuity of $5,751. Calculator Use Using...
View Full Document

Ask a homework question - tutors are online