Problem

Find the future value of the ordinary annuity. Interest is compounded annually. \[ R=2000 ; \quad i=0.09 ; \quad n=5 \] Which of the following formulas will calculate the future value? A. $F=2000\left[\frac{(1+0.09)^{5}-1}{0.09}\right]$ B. $F=2000\left[\frac{(1+5)^{0.09}-1}{5}\right]$ C. $F=2000\left[\frac{(1+0.09)^{5}-1}{0.09}\right]+2000$ D. $F=2000\left[\frac{(1-0.09)^{5}+1}{0.09}\right]$ The future value of the ordinary annuity is $\$ \square$. (Do not round until the final answer. Then round to the nearest cent as needed.)

Solution

Step 1 :We are given the following values: \(R=2000\), \(i=0.09\), and \(n=5\). We are asked to find the future value of the ordinary annuity.

Step 2 :The future value of an ordinary annuity can be calculated using the formula: \(F = R \left[\frac{(1+i)^n - 1}{i}\right]\), where: \n- F is the future value of the annuity \n- R is the periodic payment \n- i is the interest rate per period \n- n is the number of periods

Step 3 :Substituting the given values into the formula, we get: \(F = 2000 \left[\frac{(1+0.09)^5 - 1}{0.09}\right]\)

Step 4 :Calculating the above expression, we find that the future value of the ordinary annuity is approximately \$11969.42

Step 5 :Final Answer: The future value of the ordinary annuity is \(\boxed{\$11969.42}\)

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Source: https://solvelyapp.com/problems/RwAUyZPC6r/

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