Annuity: Future Value 
 Section 9.2  
Annuity: Future Value  
Annuity: Payment or Rent 


Compound Interest and Annuities Click for Calculator
You decide to save for your child's college education by depositing $100 at the end of each month into a savings account paying 6% interest compounded monthly. How much money will be in the account after 18 years? 
Solve 
Step 
i = 0.06 ÷ 12 = 0.005 
k = 12, r = 0.06, Monthly means 12 times a year 

P is payment = 100, n = 18 years 

Find the Future Value 


You would have $38,735.32 after 18 years. (before taxes)  
Enter 100 × ( (1 + 0.06 ÷ 12 ) x^{y }( 12 × 18 )  1) ^{ }÷ .005 [enter or =] in your calculator  
Hint: don't round until you are completely finished with your calculations.  

You decide to save for your child's college education by depositing $200 at the end of each month into a savings account paying 6% interest compounded monthly. How much money will be in the account after 18 years? 
[Solution] 


You want to save $35,000 for a pool. How much should you deposit each month with an annual rate of 3% for 5 years in order to save for the pool? 
Solve 
Step 
i = 0.03 ÷ 12 = 0.0025 
k = 12, r = 0.03, Monthly means 12 times a year 

FV is payment = 35,000, n = 5 years 

Find the Future Value 
P = 541.40 

You make 60 equal payments of $541.40 in order to save $35,000.  
Enter 35,000 × .0025 ÷ ( (1 + 0.03 ÷ 12 ) x^{y }( 12 × 5 )  1) [enter or =] in your calculator  
Hint: don't round until you are completely finished with your calculations.  

You want to save $20,000 for a car. How much should you deposit each month with an annual rate of 9% for 4 years in order to save for the car? 
[Solution] 


Tutorials and Applets by
Joe McDonald
Community College of Southern Nevada