1. Future Value of an Ordinary Simple Annuity Annuity - Series of equal payments or deposits earning compound interest and made at regular intervals over a fixed period of time. Examples: Simple Annuity - An annuity for which the compounding period is equal to the payment period. Example A series of MONTHLY payments of $300 earning 5% interest compounded MONTHLY. Ordinary Annuity - an annuity for which the payments are made at the end of each payment period. (all examples we are going to do this unit are ordinary.)

2. Who wants to me a millionaire? Most people want to be able to retire with a nice amount of money saved away. So how much money do you need to invest each year in order to reach $1 million at retirement age? If you retire at the age of 55, assume that you will be making regular payments at the end of each year until then. If you can earn 8% annual interest compounded annually, using the TVM solver, how much will you need to invest each year to acquire $1 million? Retirement Age: 55 Your age: ______ Years until you retire: ______ Since this is a simple annuity P/Y = C/Y Calculate your yearly payment. Repeat this if you were going to retire at age 60 and 65. Retirement Age: 60Retirement Age: 65Your age: ______Years until you retire: ______

3. Example Ms. Richardson is saving for the down payment on a new car. She plans to deposit $1000 at the end of each month into an account that pays 3% annual interest, compounded monthly. Determine the amount that will be in Ms. Richardson’s account at the end of 6 months. Method 1: Timeline

4. Method 2: TVM Solver Method 3: Formula FV - Future value PMT - Regular payment amount i - interest rate per compounding period n - total number of payments or deposits PMT = 1000 i = 0.06 = 0.0025 12 n = 0.5 x 12 = 6