Value Worksheet With Answer Key
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88.5
Regular Annuities:
Determining Future Value
YOU WILL NEED
GOAL
graphing calculator with
•
Solve future-value problems involving regular payments or deposits.
TVM Solver
•
spreadsheet software
INVESTIGATE the Math
When Jessica turned 13 years old, her grandmother gave her $500. Jessica
deposited the money into a savings account that paid 4.5%/a compounded
annually. Since then, Jessica’s grandmother has made an automatic deposit of
$500 into Jessica’s account on her birthday each year. Each payment earns a
different amount of interest because it compounds for a different amount
of time.
?
How much money is in Jessica’s bank account on her
18th birthday, and how much interest has it earned?
The timeline shows the deposits of the
made into Jessica’s
A.
annuity
annuity
account. For how many compounding periods has the $500 deposit
a series of equal deposits or
payments made at regular
on her 17th birthday earned interest? For how many compounding
intervals; a simple annuity is an
periods has each of the 16th, 15th, 14th, and 13th birthday deposits
annuity in which the payments
earned interest?
coincide with the compounding
period, or conversion period; an
ordinary annuity is an annuity
Future value of Jessica’s annuity
in which the payments are made
at the end of each interval;
unless otherwise stated, each
Year
13
14
15
16
17
18
Future value
annuity in this chapter is a
simple, ordinary annuity
Deposit
$500
$500
$500
$500
$500
$500
0
0
(1 + )
= 500(1.045)
= 500
Complete the timeline by calculating the amount, or future value, of
B.
each $500 birthday deposit. The deposit made on Jessica’s 18th
birthday has not earned any interest. (In the diagram, R is like the
variable P you have been using in earlier sections.)
What is the total amount of the annuity on Jessica’s 18th birthday?
C.
How much of the annuity is interest earned?
D.
493
493
NEL
NEL
Solving Financial Problems Involving Exponential Functions
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