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
PMT 5 N 7 I
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...
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