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Calculate using the formula

MCR 3UI Unit 7 – Day 2. Calculate using the formula. You invested $1000 into an account paying 1 0%/a compounded quarterly. Use the formula to determine the value after 3 years.

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Calculate using the formula

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  1. MCR 3UIUnit 7 – Day 2 Calculate using the formula You invested $1000 into an account paying 10%/a compounded quarterly.Use the formula to determine the value after 3 years. You want to have $1000 saved in 3 years. The money invested at 4.4%/a compounded semi-annually. Use the formula to determine the amount you would need to invest today. How much interest did you earn in each situation above? Why did you earn different amounts of interest in the two situations?

  2. Unit 7 – Day 2: Future Value of an AnnuiTy • Explain what an annuity is • Determine the present or future value of an annuity.

  3. Explain what an annuity is Boris invested $100 at the end of each year for 3 years. If interest was 4% / a compounded annually, determine how much money he would have after 3 years. 2 years 3 years start 1 year $100 104 $100 ??? $100 108.16 ??? Total: 312.16 P = 100 P = 100 i = 0.04 i = 0.04 n = 2 n = 1 OR An annuity is an investment / loan with a repeated (identical) payments.

  4. Explain what an annuity is • Determine the present or future value of an annuity Example 4: Future value of an annuity Use the formula to determine the future value a) At the end of each month you invested $100 into an account paying 6%/a compounded monthly. How much would you have saved in 5 years? b) Repeat part a if you invested $25 each week and interest was 5.2%/a compounded weekly for 5 years. c) How much interest was earned in each situation? d) After the final payment you left the money in the account for 2 more years. How much money would you have in each situation?

  5. Explain what an annuity is • Determine the present or future value of an annuity Example 5: Finding the regular payment or the number of payments a) Boris wants to deposit the same amount of money at the end of each quarter for 10 years into an account paying 3.6% / a compounded quarterly. How must does he need to deposit each time to accumulate $1,000,000? b) Crackers wants to make equal payments at the end of each year for 10 years into an account paying 3.6% / a compounded annually. How much would he need to invest today to accumulate 1,000,000? How many monthly payments of $100 would you need to make into an account paying 3.6% /a compounded monthly to accumulate 1,000,000?

  6. Today’s HW: pg 152 , # 8, 10 – 12, 17, 19 *Skip all parts that ask for series (There are several questions that ask for them) * I would recommend timelines for all questions, even if they are not asked for. Hints * Question 8: Example 4ab * Question 10: Example 5ab * Question 11: Example 4d * Question 12: Example 4d * Question 17: Example 5c * Question 19: Example 5ab (19e is based on Example 4c but doesn’t ask for interest)

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