When payments are made at the beginning of each period, you can treat them as an

Question

When payments are made at the beginning of each period, you can treat them as an annuity due, a perpetuity, or an oridinary annuity.

You are planning to put $1,500 in the bank at the end of each year for the next five years in hopes that you will have enough money for a down payment on a condo. If you are investing at an annual interest rate of 6%, how much money will you have at the end of five years—rounded to the nearest whole dollar?

$8,963

$8,456

$6,765

$10,147

You’ve decided to deposit your money in the bank at the beginning of the year instead of the end of the year, but now you are making payments of $1,500 at an annual interest rate of 6%. How much money will you have available at the end of five years—rounded to the nearest whole dollar?

$8,963

$6,274

$12,548

$8,456

Explanation / Answer

1.

2.

YEAR PAYMENT FV FACTOR FV 1 1500 1.26247696 1894 2 1500 1.191016 1787 3 1500 1.1236 1685 4 1500 1.06 1590 5 1500 1 1500 TOTAL 8456

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