Calculate the future value of an annuity

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Reference no: EM133001687

Use the formulas to calculate the PV or FV Future Value of Single AmountFV Future ValuePV Present Value

i Interest rate (in decimal form)

n Number of time periods (must be consistent with interest rate)

Future Value Formula: FV = PV (1+i)^n

Present Value Formula: PV = FV 1/(1+r)^n

1 - Know how to calculate the Future Value of a Lump Sum. What is the Future Value of $1000 earning 8% after six years?

2 - Know how to calculate the Future Value of an Annuity.

a. What is the Future Value of an annual deposit of $2400 earning 8% after 40 years?

b. What is the Future Value of an annual deposit of $2400 earning 8% after 20 years?

c. Comparing those two calculations, why is it important for someone to start saving for retirement when they are young?

3 - Know how to calculate the Present Value of a Lump Sum. What is the Present Value of $1000 earning 8% for six years?

4 - Know how to use Present Value to Determine Loan Payments. If you borrow $1000 with a 6% interest rate to be repaid in three equal payments at the end of the next three years, what will the annual loan payment be?

Reference no: EM133001687

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