AnnuitiesDueputtingitalltogether幻灯片.pptVIP

Chapter 13 Annuities Due;Annuity classification flowchart P508—figure 13.3;Example: calculate the time required to pay off a $25,000 loan at 8.25% compounded monthly if the loan is required by A, quarterly payments of $600; B, monthly payments of $200; C,semimonthly payments of $100; D, in every case, a total of $600 is paid every three months. Explain why the time required to repay the loan shortens as smaller payments are made more frequently. ;Solution:;B ;C ;D ;Example; Victor anticipates that he can contribute $5000 to his RRSP at the beginning of each of the next 15 years and $10,000 at the beginning of each of the subsequent 15 years. Can Victor achieve the desired retirement income if the RRSP earns 8% compounded semiannually and the funds used to purchase the annuities earn 7.5% compounded monthly? ; ;Step 3: calculate the present value of annuity 3 when Victor is 60 years old--An1;Step 4: calculate the future value of Sn1 - An1 when he is 70 years old-- Sn;Step 5: calculate the present value of annuity 4 when Victor is 70 years old--An;Step 6: compare Sn and An when Victor is 70 years old;