Explain compound value of an annuity, Financial Management

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Q. Explain Compound Value of an Annuity?

Compound Value of an Annuity: - Annuity demotes to the periodic flows of equal amounts.

FV = A {(1+i)n - 1}/i

Instance: - Mr. X invests Rs. 2000 at the end of every year for 5 years into his account interest being 5% compounded annually. Conclude the amount of money he will have at the end of the 5^th year.

FV = 2000 {(1+.05) ⁵- 1}/.05

FV = Rs. 11054

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