1 / 5

5.8 Annuities

Objective: SWBAT compute the future value of an ordinary annuity and an annuity due. 5.8 Annuities. Vocabulary and Formulas. Annuity – an equal amount deposited in an account regularly over time (ex. Retirement) ‏

lela
Télécharger la présentation

5.8 Annuities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Objective: SWBAT compute the future value of an ordinary annuity and an annuity due 5.8 Annuities

  2. Vocabulary and Formulas • Annuity – an equal amount deposited in an account regularly over time (ex. Retirement)‏ • Annuity Due – an annuity where the deposits are made at the beginning of an interest period • Ordinary Annuity – an annuity where deposits are made at the end of an interest period • Future Value = Deposit x Future Value of $1.00 • FV of Annuity Due = FV of Ordinary Annuity x ($1.00 + Rate per Period)‏

  3. Example • $1200 is deposited quarterly at 6% for 2 years. • What is the Future Value of Ordinary Annuity? • What is the Future Value of Annuity Due? • Solution • Step 1: Find the pay periods: 4 x 2 = 8 • Step 2: Find the Interest Rate Per Period • 6% / 4 = 1.5% • Step 3: Look on p. 798 for “Amount for $1.00” • 8.43284 • Step 4: Find the FV of Ordinary Annuity • 1200 x 8.43284 = $10,119.41

  4. Solution Cont'd • Find the Future Value of Annuity Due • FV of Annuity Due = FV of Ordinary Annuity x ($1.00 + Rate per Period)‏ • FV of Ordinary Annuity = $10,119.41 • Rate per Period = 1.5% • FV of AD = $10,119.41 x ($1.00 + .015)‏ • FV of AD = $10,119.41 x 1.015 • FV of AD = $10,271.20

  5. Assignment • p. 218-219 1-14all, 16-24 even

More Related