TVM Concepts

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4. What is an annuity? How does an ordinary annuity differ from an annuity due? Where do we run into annuities - give two examples. 5. Find the future value of an ordinary annuity of $100 per year for three years at 10% rate of return. Calculate future value using a simple equation and then using a financial calculator. 6. What if the above annuity is an annuity due? How would your calculation and answer change? 7. Suppose Jane has agreed to make $457 payments at the end of every year for 7 years on a loan. How much would she have to pay today, if she decided to pay off the loan in one lump sum? The interest rate on the loan is 10%