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Chapter 4B Notes - Page 1 of 3 Math 1332 College...

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Page 1 of 3 Source: College Mathematics , Rockswold G., Bennett J., and Briggs W. C:/CLASES_COLEGIO/2007/NOTAS/0102/ 02/28 Math 1332 - College Mathematics Chapter 4B Notes Savings Plans and Investments Sometimes we do not have large amounts of money to initially invest/deposit into a savings account; however we may afford to make periodic payments (PMT) instead and let it grow. Consider your retirement, savings, college funds for your children, and other investments. Definitions Annuity – What financial planners call any series of equal, regular payments. Ordinary Annuity – A savings plan in which payments are made at the end of each month. Annuity Due – A plan in which payments are made at the beginning of each period. Endowment – An account that provides a permanent source of income without reducing its principal. Savings Plan Formula (Regular Payments) : A = PMT x ( (1 + (APR / n) nY ) – 1 ) , where (APR / n) A = accumulated balance (also referred to as FV, future value) PMT = starting Principal (also referred to as PV, present value) APR
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