Annuity:  Present Value -- Section 9.3 --

 Annuity: Payment or Rent Annuity: Present Value PV = Present Value P = Payment or Rent  A = Future Value i =  r ÷ k,  r = is annual rate, k = number of periods per year n = number of years

Compound Interest and Annuities Click  for Calculator Having just won \$1,000,000 after taxes in the state lottery, how much money can you withdraw at the end of each quarter for 20 years if the banks pays 10% interest compounded quarterly.
 Solve Step i = 0.10 ÷ 4 = 0.025 k = 4, r = 0.10, Quarterly means 4 times a year A is present value= 1,000,000 n = 20 years Find the Future Value You would withdraw \$29,026.40 every 3 months for 20 years. Enter 1,000,000 × 0.025 ÷ ( 1 -  1.025 xy ( -4 × 20 ) )    [enter or =] in your calculator Hint: don't round until you are completely finished with your calculations.  Having just won \$1,000,000 after taxes in the state lottery, how much money can you withdraw at the end of each month for 20 years if the banks pays 6% interest compounded monthly. [Solution]  You want to deposit enough money into the bank so that you can withdraw \$5,000 at the end of each month for 60 months.  If the banks pays 12% interest compounded monthly, how much money should you deposit?
 Solve Step i = 0.12 ÷ 12 = 0.01 k = 12, r = 0.12, Monthly means 12 times a year P is payment = 5000, n = 5 years (60 months) Find the Present Value You would have to deposit \$224,775.19 so that you can withdraw \$5,000 a month for 60 months. Enter 5,000 × ( 1 - 1.01 xy - 60 )  ÷ .01  [enter or =] in your calculator Hint: don't round until you are completely finished with your calculations.  You want to deposit enough money into the bank so that you can withdraw \$10,000 at the end of each month for 10 years.  If the banks pays 9% interest compounded monthly, how much money should you deposit? [Solution] Tutorials and Applets by
Joe McDonald