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Thread: Deferred Annuities

  1. #1
    Mar 2009

    Deferred Annuities

    Yankee construction company agreed to lease payments of 762.79 on construction equipment to be made at the end of each month for six years. Financing is compounded at 15% monthly.

    If, due to delays, the first eight payments were deferred, how much money would be needed after nine months to bring the lease payments up to date.

    Any help would be appreciated.
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  2. #2
    Junior Member
    Mar 2009
    "Up to date" sounds like they want a lump sum payment in the ninth month rather than just increasing the remaining payment so its not really a deferred annuity you just need to calculate the present value of the missed payments in minie months plus the 9nth month payement.

    P=Monthly Payment
    i= Monthly interest rate 1 1/4 %

    P(i^8 +i^7 +...1) = P((i^9-1)/(i-1))

    If they do mean stretching out the missed payment over the remaining years subtract P from the above amount and find the monthly payment of paying the amount for 4 years 3 months. Adds this to P to find your new monthly rate.
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