Savings Annuities

  • View
    19

  • Download
    1

Embed Size (px)

DESCRIPTION

Savings Annuities. Savings Annuities. An annuity is where you make a series of periodic payments into an account. The typical types of accounts are superannuation and loans. There are basically two types of annuities. Future Value Present Value. Future Value. - PowerPoint PPT Presentation

Text of Savings Annuities

Savings Annuities

Savings AnnuitiesSavings AnnuitiesAn annuity is where you make a series of periodic payments into an account.The typical types of accounts are superannuation and loans.There are basically two types of annuities.Future Value Present ValueFuture ValueThis is when the lump sum of money will exist in the FUTURE.You need to read the question and decide on when the lump sum will exist.Then you need to write down the variables.Which ever one you are missing is the one you have to find.

Finding FVN = I% =PV =Pmt = FV =P/Y =C/Y =

15 x 160-600 ?11

Solution : $13965.58Finding FV

Note that PMT is negative

Future Value - nYou need to read the question to make sure that the LUMP SUM will exist in the FUTURE and there are a series of deposits.Write down the variables check P/Y and C/YEnter the data in and solve for n F1The answer you get will be in terms of the number of periods i.e. number of months.

There are a regular series of payments so it has to be an annuity question.The money will exist in the FUTURE so it has to be a future value question.We have the FV the PMT, the Rate (I%) we havent got n.N = I% =PV =Pmt = FV =P/Y =C/Y =

?6.150-400 150001212

Solution : 34.39Finding n

34.39 monthsFuture Value I%You need to read the question to make sure that the LUMP SUM will exist in the FUTURE and there are a series of deposits.Write down the variables check P/Y and C/YEnter the data in and solve for I% F2The answer you get will be the rate required.There are a regular series of payments so it has to be an annuity question. The money will exist in the FUTURE so it has to be a future value question.We have the FV the PMT, the term we havent got I%.

N = I% =PV =Pmt = FV =P/Y =C/Y =

4 x 4?0-15002800044

Solution : 8.08%Finding i

8.08%