Activity on Annuities: ANNUITIES: 1. Find the future value of an ordinary annuity a.) $500 a year for 10 years compounded annually at 5% b.) $100 a year for 5 years compounded annually at 10% c.) $35 a year for 7 years compounded annually at 7% d.) $25 a year for 3 years compounded annually at 2% 2. You’ve been house shopping but aren’t sure how big a house you can afford. You figured out that you can afford a monthly mortgage payment at the end of every period of $1,250 and you can get a 30-year loan at 6.5%. How big of a mortgage can you afford today? 3. How long will it take to pay off a loan of $50,000 at an annual rate of 10% compounded monthly if you can make monthly payment of $600? 4. You’ve been offered a loan of $30,000 which you will have to repay in five equal annual payments of $10,000 with the first payment to be received one year from now. What interest rate would you be paying on that loan? 5. What amount will accumulate if we deposit $5,000 at the end of each year for the next 5 years? Assume an interest of 6% compounded annually? a) Pmt = 100, n=20, compounded monthly b) Pmt = 150, n=10, compounded quarterly c) Pmt = 180, n=15, compounded semi-annually 6. Mr A deposited $700 at the end of each month of calendar year 2019 in an investment account of 9% interest rate. Calculate the future value of the annuity on Dec 31, 2020. 7. Calculate the future value of 12 monthly deposits of $1,000 if each payment is made on the first day of the month and the interest rate per month is 1.10% 8. Assume that at a certain age, you contribute $5,000 at the beginning of each year to an individual retirement accounts earning 8% interest per year, and you continue making contributions until age 70. For example, if at the age of 20, you start contributing $5,000 at the beginning of each year. a) You start at the age of 21 b) Pmt = 10,000 start at the age of 16 9. Determine the present value of an annuity due of $1,000 per year for 10 years discounted back to the present at an annual rate of 10% a.) Annual rate of 15% b.) PMT = 7,000, r=12, n=12
