TVM52 - Future Value of Annuity Due

Audio Transcript

On January 1, 2019, DEF Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $60,000 at 8.5% each January 1 beginning in 2019. What will be the balance in the fund, on January 1, 2024 (one year after the last deposit)?

 

Compute the future value of an annuity due

 

Enter the known variables.

The payment, PMT, is -$60,000.

The rate is 8.5%.

The number of periods, NPER, is 5.

The Type = 1, since payment is at the beginning of the year

We go to the Formulas tab and look for the FV function.

We click on PMT,

We click on rate,

We click on NPER.

We click on TYPE

Click OK

The future value, FV, is $385,742