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Chapter 3, Section 6

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Chapter 3, Section 6

Annuities

- Calculate the future value of an ordinary annuity.
- Calculate the present value of an ordinary annuity.

- A series of equal payments made at regular intervals of time.
- Examples: Rent, salaries, loan payments, and making regular deposits into a saving account.
- An annuity due is when payments are made at the beginning of each period.
- An ordinary annuity is when the payments are made at the end of each period.

- The amount of money in an account after a series of equal payments are made to it, including interest the money has earned.
- So…the total amount of money in your account at the end!
- You can calculate this by looking at a table and finding the multiplier—just like we did with interest.
- Example 1, p. 116
- Check your understanding A & B

- The balance needed in an account in order to make a series of payments from the account.
- Even when money is being taken out of the account, you still earn interest on the money in the account.
- To find the present value of an annuity—use a table to find the multiplier.
- Example 2, p. 117
- Check you understanding C & D

- P. 118, 11-13
- P. 119, 16-18, 21-22, 25-27