macompas3.pptx - FINDING THE ANNUITY PAYMENTS FOR ORDINARY...

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FINDING THE ANNUITY PAYMENTS
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FOR ORDINARY ANNUITY: is equal to the Present Value. is equal to the Future Value. represents the periodic annuity payments. i i A R n ) 1 ( 1 i i S R n 1 ) 1 (
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example Present value ou can get a 150,000 home mortgage at 7 annual interest rate for 30 years. Payments are due at the end of each year and interest is compounded. How much will your payments be? PVoa = 150,000, the loan amount i = 7% n = 360 periods (12 payments per year for 30 years) payment = 150,000 / [(1 - ( 1 / (1.07) 30 )) / .07] = 12087.96 Future value n 10 years, you will need $50,000 to pay for college tuition. Your savings account pays 5% interest compounded . How much should you save each year to reach your goal? FVoa = 50,000, the future savings goal i = .004167 interest per month (.05 / 12) n = 120 periods (12 payments per year for 10 years) payment = 50,000 / [(1.004167 120 - 1) / .05] = 3975.22
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FOR ANNUITY DUE: i i A R n ) 1 ( ) 1 ( 1 1 1 1 ) 1 ( 1 i i S R n
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FINDING THE NUMBER OF PERIODS, N: ANNUITY DUE ORDINARY ANNUITY ) 1 log( 1 * 1 log i i PP i FV n
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