MATH 034 Lecture 6: MATH 34 April 23
Document Summary
Paying every month for next 30 years. Is this present or future value: present value. Ex: your rent is due at the end of the month. Is this ordinary annuity or annuity due: ordinary annuity because it is due at the end of the month. Future value of ordinary annuity: fv = pmts v(n/i, fv is future value, pmt is amount of each payment, s v(n/i) is the annuity factor. S v(n/i) = [(1+i)^n-1] / i i represents the interest rate per payment period: n represents the number of payments. Ex: find the future value annuity factor for a term of 20 years with an interest rate of 7. 9% compounded annually: sn/i = [((1+0. 079)^20)-1]/0. 079 = 45. 258204619. Ex: suppose that is deposited each year into an account paying 7. 9% interest compounded annually. What will the future value of the account be after 20 years: fv = 750 (45. 258204619) = ,943. 65.
