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Suppose Juan invests in an annuity that pays 6% annual interest, compounded annually. He contributes $4,000 annually for 5 years. What is the value of the annuity after 5 years? Input your answer rounded to the nearest hundred dollars and omit the dollar sign and comma (For example, $42,570.21 should be entered as 42600.)

Respuesta :

The value of the annuity after five years is $22,500

The formula for determining the future value of an annuity : A x annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

A = amount =  $4,000

r = interest rate = 6%

n = time = 5

Annuity factor = [(1 + 0.06)^5 -1] / 0.06 = 5.637093

Future value = 5.637093 x $4000 = $22,548.37

$22,500 to the nearest hundred dollars

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