Future value annuity versus annuity due a Whats the future v

Future value: annuity versus annuity due

a. What\'s the future value of a 4%, 5-year ordinary annuity that pays $700 each year? Round your answer to the nearest cent.

b. If this was an annuity due, what would its future value be? Round your answer to the nearest cent.

Solution

a) FV of an ordinary annuity:

FV of cash flows = [PMT * {(1 + I/Y)^N