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# 5.4/5.5 - Annuities (Present And Future Values

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## Brannon Smith-Gho

on 10 June 2014

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#### Transcript of 5.4/5.5 - Annuities (Present And Future Values

What is an "Annuity"
Understanding Variables
Try Example!
THE END
Try Example! AGAIN!
Making Annuity Payments
Annuity
- Investment, whereas a fixed amount of money is consistently deposited or paid off in regular interval through a set period of time.
R
= Regular deposits/payments are made each compound period
A
= Future Value is the amount of deposit/payments in addition to interest made every compound period
I
= Interest rate per period, determined by annual rate divided by compounding periods
n
= # of total interest periods from beginning of investment to end, determined by compounding period x number of years until end of investment
This formula can be used to find Future value, Regular Payments or number of interest periods (either one, not all at same time) given that the rest of the required information is given, lets try each example now!
Just like annuity investments, annuity payments can be used to solve Present Value, Regular Payments, and # of Compound Periods. Lets try one example of each!
Annuity can also be used in reverse to calculate periodic payments that are collecting interest, the new equation is as follows:
5.4/5.5 - Annuities (Present And Future Values
A=
R[(1+
i
) - 1]
n
i
S=
n
a (r - 1)
n
r - 1
A =
Amount or Future Value
R =
Regular Deposits/Payments
i = Interest Rate per Period
n = Number of Interest Periods
PV =
R[1 - (1 +
i
) ]
i
-n
PV = Present Value
Value
R =
Regular Deposits/Payments
i = Interest Rate per Period
n = Number of Interest Periods
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