Use the formula to calculate the value of the annuity described in the graph, andcompare the results after five years.5.In Student Activity Sheet 5, you learned to use a TVM calculator to determine differentvariables related to TVM. In your prior work with the TVM calculator, you only consideredlump-sum investments (and the payment variable was always 0).Explore using the TVM calculator to determine the future value of the $200 annuity overfive years, and compare your answer with the known future value of $1,343.12. List thevalues you assigned to each variable and explain why.(Note:Interest is typically paid at the end of the compounding period. In this case, youmake payments at the beginning of each period. Therefore, you must change appropriatevariable from END to BEGIN.)VariableDefinition of VariableValue in ThisSituationNnumber of compounding periods between the timeof investment and the time of retirementI%annual interest rate (as a percent)PVprincipal, or present valuePMTamount of each regular paymentFVfuture value, or value of the investment at maturityP/Ynumber of payments per year (usually the same asthe number of compounding periods per year,C/Y)C/Ynumber of compounding periods per year

Student:Class:Date:Decision Making in Finance: Building an InvestmentVI.C Student Activity Sheet 6: Investing As You GoCharles A. Dana Center at The University of Texas at AustinAdvanced Mathematical Decision Making (2010)Activity Sheet 6, 4 pages216.Amy is 25 years old and has attended some retirement planning seminars at work.Knowing she should start thinking about retirement savings early, Amy plans to invest inan annuity earning 5% interest compounded annually. She plans to save $100 from hermonthly paychecks so that she can make annual payments of $1,200 into the annuity.Use the TVM calculator to determine the future value of the investment after 35 years.VariableDefinition of VariableValue in ThisSituationNnumber of compounding periods between the time ofinvestment and the time of retirementI%annual interest rate (as a percent)PVprincipal, or present valuePMTamount of each regular paymentFVfuture value, or value of the investment at maturityP/Ynumber of payments per year (usually the same asthe number of compounding periods per year,C/Y)C/Ynumber of compounding periods per year7.Amy seeks the advice of a financial planner, who recommends $850,000 for retirement.Will Amy’s annuity plan provide the necessary funds for her retirement? If not, whatcould she do to increase the value of the investment at retirement? Of those actions,which does she have relative control over?

Student:Class:Date:Decision Making in Finance: Building an InvestmentVI.C Student Activity Sheet 6: Investing As You GoCharles A. Dana Center at The University of Texas at AustinAdvanced Mathematical Decision Making (2010)Activity Sheet 6, 4 pages228.Amy finds another annuity that accounts formonthlycompounding andmonthlypayments. The annuity pays 6% annual interest, compounded monthly. Use the TVM

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