1. Lesson 2 The amount of an Annuity
March 30, 2011

2. An Annuity is a series of equal deposits or payments made at regular intervals of time.
R= payment amount/deposit
i = interest rate per compounding period
n = total number of compounding periods or number of payments
This formula looks at ordinary simple annuities and it is called “the amount” formula. It is also known as the “future value” formula.

3. We can use the amount formula when:
The payment interval is the same as the compounding period
A payment is made at the end of each compounding period
The first payment is made at the end of the first compounding period.

4. a) How much will Jackie have in her account in 2.5 years? A=? R= 250
EX1: Jackie invests $250 every 3 months into an account that earns interest at rate of 5%/a compounded quarterly.
a) How much will Jackie have in her account in 2.5 years?
A=?
R= 250 i= n=

7. b) How much interest did Jackie earn?

8. a) How much will Michael have to spend on a car? A=? R=325
EX2: Michael is saving up to buy a car. Over the next 4 years, Michael will make monthly deposits of $325 into an account that earns interest at 3.9%/a compounded monthly.
a) How much will Michael have to spend on a car? A=? R=325

10. b) How much interest did he earn?
Assignment: page 417#11, 12