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Determining the Term of an Annuity
(section 3.5)
Given:
S
or
A, R, i
Determine:
n
Method
You can use logs to solve:
S
=
R
i
n
s

or
A
=
R
i
n
a

Problem
•
n
will rarely be an integer
•
will need to calculate a final payment
that is different from
R
in order to have
equivalence
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1.
The last regular payment is increased
by an amount which will make the
payments equivalent to A or S
2. A smaller concluding payment is
made one interest period after the last
regular payment
Example 3.5.1
You receive an inheritance of $25,000.
You
invest it at
j
12
= 9%.
How many monthly
payments of $250 can you expect to receive and
what is the size of the final payment using both
methods?
Solution to 3.5.1
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A couple wishes to accumulate $10,000 by
depositing $250 at the end of each quarter in a
fund earning
j
4
= 16%.
How many deposits
must they make and what is the size of the final
deposit under both methods?
Solution to 3.5.2
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This note was uploaded on 04/14/2010 for the course ACSCI 2053 taught by Professor Kopp during the Spring '09 term at UWO.
 Spring '09
 Kopp

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