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Annuities – the “Future Value” of periodic deposits Mat 112
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First, a note To compute a particular type of sum (a “geometric sum”), where the terms are powers of some number, such as: The total is simply given by
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Annuities
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Forming a “future value”
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Making Deposits
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First Deposit
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Second Deposit
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And so on…
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…for a total of ?
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Interest Earned?
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Future Value formula Why? Results from determining the geometric sum.
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Given FV, find PMT
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FV formula
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Examples for Future Value Mat 112
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FV Example
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How much interest?
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PMT Example
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Calculate carefully! PMT = $104.31 (or round up to $104.32 to be safe)
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Example: “quarterly deposits”
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Example: “IRA”
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Solving for n? Mat 112
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A Bigger Challenge?
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Using the Log… Or simply,
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Bring down the exponent
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Not Another Formula? Although the text offers this result as a new formula and we could memorize It seems more reasonable to just solve this exponential equation in the usual way.
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Does it Check?
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