the length of time it takces to reach a financial goal using an annuity. Groing annuities are oftan used in the area of financial planning. Thair analysis is more complex and oftan easier solved using a financial spreadsheet so we will limit our discussion here to the first two types of annuibes. 7, The future value of an ordinary annuity. FVAN is the total amount one would have at the end of the annuity period if each payment (PMT) ware invested at a given interest rate and held to the end of the annuity period. The aquation is Each payment of an annuity due is compounded for one | -select. | | Penod, so the future value of an annuity due is equal to the future value of an ordinary annuity compounded for one-select-. period. The equation is: The present value of an ordinary annuity, PVAN is the value today that would be equivalent to the annuity payments (PMT) received at fixed intervals over the annuity period. The equation is Each payment of an annuity due is discounted for one -Seleet pariod, so the presant valua of an annuity due is aqual to the presant value of an ordinary annuity multiplad by (1+). The equation s PVA-Py(1 I One cen solve for payments (PMT), periods (N), and interest rates (T) for annuities. The easiest way to solve for these variables is with e financial calculator or a spreadsheet quantitative problem 1: You plan to deposit S 1,900 per year for 6 years into a mony market account with an annual return of 3%. You Plan to make your first deposit one year from today. . What amount wll be in your account at the and of 6 years? Round your answer to the nearest cent. Do not round intarmediate calculations b. Assume that your deposits will begin today. What amount will be in your account after 6 years? Round your answer to the nearest cent. Do not round intermediate calculations. uantitative problem 2: You and your wife are making plan for rat rement. You plan on living 30 years after you rat re and would like to have $85,000 annually on which to live. Your first withdrawal wall be made one year after you retire and you anticipate that your retrement zccount will earn 15%-nnually . What amount do you need in your retirement account the day you retire? Round your answer to the nearest cent. Do not round intermediate calculations A-Z b. Assume that your first withdrawel will be made the day you retire. Under this assumption, what amount do you now need in your retirement account the dey you retire? Round your answer to the nearest cent. Do not round intermediate calculations. AM 6:23 14/2019
