Annuties (1 Viewer)

[Paj20]

Can ne1 explian why a different method is used for these two questions..?

1.Calcualte the value of an annuity in which $1000, is invested each year at 10%p.a for 5 years

2. Bernie invests $2000 in a retirement fund at 5% p.a at the end of each year for 20 years. Calculate the future value of this annuity at retirment

The textbook says for the first qstion to use the long way by using the compound interest formula for every 6 months but the 2nd questions they just use the future value formula... just wondering why you couldnt use it for the first question??

Thanks.

 

[watatank]

you can use the FV formula for both.

 

[PC]

The textbook is possibly using the first example to explain the concept of the future value of an annuity. It's always good to work through a simple question the long way when you're first learning about them.