Question

Find the amount, present value and
interest of an annuity of 500 for 8
years, the rate of compound interest is
5% per annum.​

Answer 1

Step-by-step explanation:

The amount is $738.73 and the interest is $238.73 .

Explanation

STEP 1: To find amount we use formula:

A = P

1 +

r

n

n·t

A = total amount P = principal or amount of money deposited, r = annual interest rate n

= number of times compounded per year t = time in years In this example we have

P = $500 , r = 5% , n = 1 and t = 8 years

After plugging the given information we have

A = 500

1 +

0.05

1

1·8

A = 500 · 1.058

A = 500 · 1.477455

A = 738.73

STEP 2: To find interest we use formula A = P + I, since A = $738.73 and P = $500 we

have:

A = P + I

738.73 = 500 + I

I = 738.73 − 500

I = 238.73