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Math Help - present value of an ordinary simple annuity

  1. #1
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    present value of an ordinary simple annuity

    Calculate the future value of an ordinary annuity consisting of quarterly payments of $1200 for five years if the payments earn 10% compounded quarterly for the first 2 years and 9% compounded quarterly for the last 3 years.

    first 2 yrs

    FV = PMT (((1+ i )^n - 1 )/i )

    FV = 1200 ((( 1 + 0.025)^8 - 1 ) /0.025)

    i = 0.10/4 = 0.025

    Fv = 10483.33

    last 3 yrs

    FV = 1200 ((( 1 + 0.0225 )^12 - 1 )/0.0225 )

    fv = 16 322.666

    do i total them at the end ? if so the final answer is suppose to be
    30 014.43

    can't figure out where i went wrong
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  2. #2
    MHF Contributor
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    The end of 2 years value you got: Fv = 10483.33
    is correct; but you need that amount's FV end of next 3 years:
    10483.33(1.0225^12)
    Calculate that, and add to your other FV, and you'll be ok.
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