I can’t understand where I’m messing up… So if I deposit $10,000 at the beginning of each of the next 10 years, starting today, into an account paying 9 percent interest compounded annually, why is it that the amount of money in the account at the end of 10 years will be closest to $165,600 than $151,900? A = $10,000; r = 0,09; N = 10 Therefore FV = A[{(1+r)^ - 1}/r] where ^ = N and the answer I’m getting is $151,929.30
You should use the formula for annuity due, not ordinary annuity.
Therefore FV = A[{(1+r)^(n+1) - (1+r)}/r] Try it.
with annuity due (payment in the beginning of each period), just remember to multiply your final answer ($151,929.30) by (1+r). so take your ordinary annuity answer, multiply it by 1.09, to get the right answer.
Got it , Thanks Dreary!
It worked - thanks approaching_c!
put your calculator in BGN mode
Guys do you think it is worth knowing formula for annuity for exam? I am using calculator and have no idea how the formula looks like…
no need at all (assuming you know the calculator well)…there are times when there some tricky questions that can only be handled by formulas or by good use of the calculator, but don’t ask me for an example.