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Calculate the future value of the following annuity streams: a. $8,000 received each year for 6 years on the last day of each year if your investments pay 7 percent compounded annually. b. $8,000 received each quarter for 6 years on the last day of each quarter if your investments pay 7 percent compounded quarterly. c. $8,000 received each year for 6 years on the first day of each year if your investments pay 7 percent compounded annually. d. $8,000 received each quarter for 6 years on the first day of each quarter if your investments pay 7 percent compounded quarterly.

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Answer:

We will derive the amount of Future values with the aid of financial calculator:

a. Future value = FV (Pv, -Pmt, N, I)

Future value = FV (0, -8000, 6, 7%)

Future value = $57,226.33

b. Future value = FV (Pv, -Pmt, N, I)

Future value = FV (0, -8000, 6*4, 7%/4)

Future value = FV (0, -8000, 24, 1.75%)

Future value = $236,088.13

c. For this case, we need to put the financial calculator at BEGIN mode

Future value = FV (Pv, -Pmt, N, I)

Future value = FV (0, -8000, 6, 7%)

Future value = $61,232.17

d. For this case, we need to put the financial calculator at BEGIN mode

Future value = FV (0, -8000, 6*4, 7%/4)

Future value = FV (0, -8000, 24, 1.75%)

Future value = $240,219.67

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