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The Regular Payment of an Annuity

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So far, our calculations have been determining these large “Amounts” or “Present Values” with annuities. While that is a great place to start, and it is important for you to keep track of these total, a more “day to day” calculation involves determining the payment (R)

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Ford F-150F-150

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Any time you get a loan, you use the present value formula to determine the payments. PV = 28 000 i = 3% (C:M) n = 5y X 12 = 60

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70 = R[ 1 – (1.0025) -60 ] 70 = R[0.139130894] 503.12 = R How much interest? 503.12 X 60 = $30 187.20 30 187.20 – 28 000 = $2187.20

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You want to retire a millionaire! A = 1 000 000 i = 4% N = 45 years R = ? Use the amount formula

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Pg 430 4,6,7,8,10,14

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Present Value and… Net Present Value. Basic Assumptions: All cash payments (receipts) Certainty regarding: Amount of cash flows Timing of cash flows All.

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