10 jane wants to set up an annuity. she receives $2000 every year for the next 5 years, with
interest at 6% per year. she is deciding whether to go with the ordinary annuity, which requires
payment at the end of each year, or an annuity due, which requires payments at the beginning
of each year. the formulas below can be used to find the future value of each annuity.
part a
[(1+i)" -1
using the formula, fvordinary annuity = c.
j, find the future value of the ordinary
annuity if c represents the cash flow per period (payment), i represents the annual interest
rate, and n represents the number of payments.
part b
[(1 + i)^ -1]
using the formula, fvannuity due = cl
j(1 + i), find the future value of the
ordinary annuity if c represents the cash flow per period (payment), i represents the annual
interest rate, and n represents the number of payments.