Determine the number of periods

Oct 13, 2025 by vinooalluri.com 20 views

Understanding the Problem

In this problem, we are tasked with finding the accumulated value of 461 payments made at the end of each quarter for 13 years. The interest rate is 7.3% compounded quarterly. To solve this problem, we will use the formula for the future value of a series of payments, which is given by:

FV = PMT x (((1 + r)^n - 1) / r)

Where:

FV = Future Value
PMT = Periodic Payment
r = Interest Rate per Period
n = Number of Periods

Breaking Down the Problem

To calculate the accumulated value, we need to break down the problem into smaller steps:

Determine the number of periods: Since the payments are made at the end of each quarter for 13 years, we need to calculate the total number of quarters in 13 years. There are 4 quarters in a year, so the total number of quarters is:

13 years x 4 quarters/year = 52 quarters

Determine the interest rate per period: The interest rate is 7.3% compounded quarterly, so we need to convert the annual interest rate to a quarterly interest rate:

Quarterly Interest Rate = Annual Interest Rate / 4 = 7.3% / 4 = 1.825% per quarter

Determine the periodic payment: The payment is made at the end of each quarter, so the periodic payment is the same as the annual payment divided by 4:

Periodic Payment = Annual Payment / 4 = $461 / 4 = $115.25 per quarter

Calculating the Accumulated Value

Now that we have all the necessary values, we can plug them into the formula for the future value of a series of payments:

FV = PMT x (((1 + r)^n - 1) / r) = $115.25 x (((1 + 0.01825)^52 - 1) / 0.01825)

Using a financial calculator or a spreadsheet, we can calculate the future value:

FV ≈ $73,919.19

Conclusion

The accumulated value of 461 payments made at the end of each quarter for 13 years, with an interest rate of 7.3% compounded quarterly, is approximately $73,919.19.

Accumulated Value Formula

The formula for the future value of a series of payments is:

FV = PMT x (((1 + r)^n - 1) / r)

Where:

FV = Future Value
PMT = Periodic Payment
r = Interest Rate per Period
n = Number of Periods

Example Use Case

This formula can be used to calculate the accumulated value of any series of payments, such as:

A series of monthly payments for a mortgage
A series of quarterly payments for a business loan
A series of annual payments for a retirement account

Tips and Variations

To calculate the accumulated value of a series of payments with a different interest rate or payment frequency, simply plug in the new values into the formula.
To calculate the accumulated value of a series of payments with a different number of periods, simply change the value of n in the formula.
To calculate the accumulated value of a series of payments with a different periodic payment, simply change the value of PMT in the formula.

Common Mistakes

Failing to convert the annual interest rate to a periodic interest rate
Failing to calculate the number of periods correctly
Failing to plug in the correct values into the formula

Conclusion

Frequently Asked Questions

Q: What is the accumulated value of a series of payments? A: The accumulated value of a series of payments is the total value of all the payments made over a period of time, including the interest earned on those payments.

Q: How do I calculate the accumulated value of a series of payments? A: To calculate the accumulated value of a series of payments, you can use the formula:

FV = PMT x (((1 + r)^n - 1) / r)

Where:

FV = Future Value
PMT = Periodic Payment
r = Interest Rate per Period
n = Number of Periods

Q: What is the difference between the accumulated value and the present value of a series of payments? A: The present value of a series of payments is the value of all the payments made today, while the accumulated value is the value of all the payments made over a period of time, including the interest earned on those payments.

Q: Can I use the accumulated value formula to calculate the present value of a series of payments? A: No, the accumulated value formula is used to calculate the future value of a series of payments, not the present value. To calculate the present value, you can use the present value formula:

PV = PMT x (((1 + r)^n - 1) / r)

Q: What is the interest rate per period? A: The interest rate per period is the interest rate divided by the number of periods per year. For example, if the annual interest rate is 7.3% and the payments are made quarterly, the interest rate per period would be 1.825% per quarter.

Q: How do I determine the number of periods? A: The number of periods is the total number of payments made over the period of time. For example, if the payments are made quarterly for 13 years, the total number of periods would be 52 quarters.

Q: Can I use the accumulated value formula to calculate the accumulated value of a series of payments with a different interest rate or payment frequency? A: Yes, you can use the accumulated value formula to calculate the accumulated value of a series of payments with a different interest rate or payment frequency. Simply plug in the new values into the formula.

Q: What are some common mistakes to avoid when using the accumulated value formula? A: Some common mistakes to avoid when using the accumulated value formula include:

Failing to convert the annual interest rate to a periodic interest rate
Failing to calculate the number of periods correctly
Failing to plug in the correct values into the formula

Q: Can I use the accumulated value formula to calculate the accumulated value of a series of payments with a different periodic payment? A: Yes, you can use the accumulated value formula to calculate the accumulated value of a series of payments with a different periodic payment. Simply change the value of PMT in the formula.

Q: What is the formula for the accumulated value of a series of payments with a different interest rate or payment frequency? A: The formula for the accumulated value of a series of payments with a different interest rate or payment frequency is:

FV = PMT x (((1 + r)^n - 1) / r)

Where:

FV = Future Value
PMT = Periodic Payment
r = Interest Rate per Period
n = Number of Periods

Q: Can I use the accumulated value formula to calculate the accumulated value of a series of payments with a different number of periods? A: Yes, you can use the accumulated value formula to calculate the accumulated value of a series of payments with a different number of periods. Simply change the value of n in the formula.

Conclusion

In conclusion, the accumulated value of a series of payments is an important concept in finance that can be used to calculate the total value of all the payments made over a period of time, including the interest earned on those payments. The accumulated value formula can be used to calculate the accumulated value of a series of payments with a different interest rate or payment frequency, and is a useful tool for financial planning and analysis.