Chapter 13.CR, Problem 8CC

### Algebra and Trigonometry (MindTap ...

4th Edition
James Stewart + 2 others
ISBN: 9781305071742

Chapter
Section

### Algebra and Trigonometry (MindTap ...

4th Edition
James Stewart + 2 others
ISBN: 9781305071742
Textbook Problem

# 8. (a) What is an annuity? Write an expression for the amount A f of an annuity consisting of n regular payments of size R with interest rate i   p e r   t i m e   p e r i o d . (b) An investor deposits $200 e a c h m o n t h into an account that pays 6% compounded monthly. How much is in the account at the end of 3 y e a r s . (c) What is the formula for calculating value of an annuity in part (b). (e) What is the present value of the annuity in part (b)? (e) When buying on installment, what is the formula for calculating the periodic payments. (f) If you take out a 5 y e a r loan for$ 10 , 000 at 3% interest compounded monthly, what is the size of each monthly payment?

To determine

a)

To find:

Meaning of an annuity and an expression for the amount Af of an annuity.

Explanation

Approach:

An annuity is a series of regular payments made over a period of time.

Af=R((1+i)n1i)

Here, Af denotes the amount of the annuity, R denotes

To determine

b)

To find:

The amount at the end of 3years.

To determine

c)

To find:

The formula for calculating the present value of an annuity.

To determine

d)

To find:

The present value of an annuity.

To determine

e)

To find:

The formula for calculating the periodic payments.

To determine

f)

To find:

The size of each monthly installment.

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