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Thread: Anuities

  1. #1
    May 2010


    Hi all, I was wondering if anyone could help me solve these two problems:

    Q1. More money 4 u have offered an anuity that pays 5.4% compounded monthly. if 1429 is deposited into this anuity every month, how much is in the account after 11 years? How much is the interest?

    Q2. In order to make a down payment on a house a couple deposits 402 into an account paying 3% compounded monthly. If the payments are made at the end of each period how much money will be in the acount in 6 years?
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  2. #2
    Jul 2011

    Re: Anuities

    Q1) A little ambiguous, but assuming the situation is you are depositing $1429 into an account every month and earning $\displaystyle j_{12} = 5.4$% on that account, then I would solve it as follows:

    Monthly rate $\displaystyle = \frac{0.054}{12} = 0.0045$

    Future value of your annuity $\displaystyle = 1429\left(\frac{1.0045^{132}-1}{0.0045}\right)$

    $\displaystyle = 256841.15$

    To find the amount of interest paid, simply subtract all the deposits of $1429 and see what you have left over.

    Question two is exactly the same, accept your regular payment is now 402, your rate is 0.03/12 and the number of payments is 6*12.
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