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# 3-3-1 - 3-3 Part I Annuities Ordinary annuity a sequence of...

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3-3 Part I Annuities Ordinary annuity a sequence of equal periodic payments made at the end of each payment period Example: an annuity of 4 payments of \$100 per month Question : How much is the annuity worth (its future value ) at the end of 4 months? Assume payments are being placed into a savings account at 12%. We use the following symbols: PMT = the periodic payment i = interest rate per period n = number of payments FV = amount ( future value of the annuity) The general formula is: FV = PMT i i n 1 ) 1 ( = PMT s n i “s angle n at i” so our FV = 100 1 01 . 1 1 01 . 1 4 = \$406.04 Example : you need \$18,000 in three years to buy a car. How much per month should you put into a 6% savings account to accumulate that amount? 3-3 Part I p. 1 end of month 1 pay \$100 end of month 2 pay \$100 end of month 3 pay \$100 end of month 4 pay \$100

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18000 = PMT 005 . 1 ) 005 . 1 ( 36 can you solve it? (\$457.59) Creating a schedule (by period) We can easily compute the future value of a series of payments using the future value formula . Suppose we want a more detailed report, period by period, that shows:
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3-3-1 - 3-3 Part I Annuities Ordinary annuity a sequence of...

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