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Annuities and Amortization. Formulas Ordinary Annuity Formula.

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Presentation on theme: "Annuities and Amortization. Formulas Ordinary Annuity Formula."— Presentation transcript:

1 Annuities and Amortization

2 Formulas Ordinary Annuity Formula

3 John Smith recently set up a tax-deferred annuity to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn annual interest. He just had his thirtieth birthday, and his ordinary annuity comes to term when he is sixty-five. Find the following: the future value of the account John’s total contribution to the account. the total interest

4 Formulas Simple Interest Amortized Loan Formula

5 Formulas Unpaid Balance Formula T is the number of years from the beginning of the loan to the present

6 Shirley bought a house for $187,600. She put 20% down and obtained a simple interest amortized loan for the balance at for 30 years. Find her monthly payment. Find the total interest. Prepare an amortization schedule for the first two months of the loan.

7 Shirley bought a house for $187,600. She put 20% down and obtained a simple interest amortized loan for the balance at for 30 years. 20 years have passed and Shirley wants to pay off the balance on her house. If there is no pre- payment penalty, what will it cost for Shirley to pay off the unpaid balance of her home loan?


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