TVM68 - Future Value of a Deferred Annuity

Audio Transcript

Richard plans to start a new business at the end of 7 years. Since he is strapped for cash, he plans to invest $8,000 only at the end of the fourth, fifth, sixth and seventh years. What is the future value of Richard’s investment at the end of the seventh year? Assume an interest rate of 7.5%

Compute the future value of an ordinary annuity

Enter the known variables.

The payment, PMT, is -$8,000.

The rate is 7.5%.

The number of periods, NPER, is 4.

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

We click on PMT,

We click on rate,

We click on NPER.

Click OK

The future value, FV, is $35,783