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Summer Session, Worksheet for Lesson 29
For the following formulas
:
S
is future value,
P
is present value,
r
is the annual interest
rate,
k
is the number of compounding periods in a year,
t
is time in years,
A
is the amount
of money, and
R
is the amount of payment; with the formula for the periodic interest rate
.
It is possible a formula from the previous lesson may also be used for these
problems.
10. Present Value
of an Annuity:
(The present value of an ordinary annuity with regular payments.)
11. ‘Sinking Fund’ Payment
for an Annuity:
(The amount of a payment that will provide a future value of an ordinary annuity.)
12. Amortization Formula
(Installment Payments):
(The amount of an installment payment when the amount borrowed is
A
.)
1)
What regular payment should be made quarterly to provide $20,000 in 10 years at
an annual rate of 6% compounded quarterly?
Round to the nearest cent.
2)
What is the present value of an ordinary annuity where payments of $800 are
made monthly, the annual interest rate is 4.92%, compounded monthly, for 15
years?
Round to the nearest cent.
3)
Instead of receiving an annuity of $12,000 every 6 months for the next 15 years, a
young woman, Grace, would like a one-time payment, now.
Assuming the annual
interest rate is 8
½
%, compounded semiannually, what would be a fair amount?
Round to the nearest dollar.

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