After carefully exmaining your budget, you determine you can manage to set aside $370 per year. You set up an annuity due of $370 annually at 6.5 % annual interest. How much will you have contributed after 22 years? What is the future value of the annuity after 22 years? How much interest will the annuity have earned?
Accepted Solution
A:
Answer:the future value of the annuity is $17057.60interest is $8917.60Step-by-step explanation:Given data annuity = $370rate (r) = 6.5% = 0.065time period (t)= 22 yearsto find out the future value of the annuity and interestsolutionwe know the future value of the annuity formula that is given belowfuture value = annuity× ( [tex](1+r)^{t}[/tex] -1 / r ) ..................1so now put all value annuity, rate , time in equation 1 to find out future valuefuture value = annuity× ( [tex](1+r)^{t}[/tex] -1 / r ) future value = 370 × ( [tex](1+0.065)^{22}[/tex] -1 / 0.065 ) future value = 370 × 46.101636future value = 17057.60532so the future value of the annuity is $17057.60and interest = future value - annuity for 22 year interest = 17057.60 - (22× 370)interest = 17057.60 - (8140)interest = 8917.60so interest is $8917.60