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Chapter 12

The document discusses ordinary general annuities including present value, future value, and payment calculations. It provides examples of calculating present and future values of deposits with regular payments over time at various interest rates. It also includes examples of calculating the size of payments needed to accumulate to a given future value or pay off a loan over time.

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Gursimran Baidwan
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19 views2 pages

Chapter 12

The document discusses ordinary general annuities including present value, future value, and payment calculations. It provides examples of calculating present and future values of deposits with regular payments over time at various interest rates. It also includes examples of calculating the size of payments needed to accumulate to a given future value or pay off a loan over time.

Uploaded by

Gursimran Baidwan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 12 – Ordinary General Annuities

Present Value (Principal, discounted value, cash payment is equivalent)

1. Calculate the present value of payments of $250 made at the end of every 3 months for 12
years if money is worth 3% compounded monthly.

2. A car was purchased for $1500 down and payments of $265 at the end of each month for four
years. Interest is 9% compounded quarterly.
a. What was the purchase price of the car?
b. How much interest will be paid?

3. As a settlement for an insurance claim, Craig was offered one of two choices. He could either
accept a lump-sum amount of $5000 now or accept quarterly payments of $145 for the next
10 years. If the money is placed into a trust fund earning 3.95% compounded semi-annually,
which is the better option and by how much?

Future Value(Accumulated value)

4. To attend school, Sam deposits $1500 at the end of every six months for four and one-half
years. What is the accumulated value of the deposits if interest is 6% compounded quarterly?

5. Mr. Tomas contributed $1000 at the end of each year into an RRSP paying 6% compounded
quarterly.
a. How much will Mr. Tomas have in the RRSP after 10 years?
b. After 10 years, how much of the amount is interest?

6. Edwin Ng made deposits of $500 into his savings account at the end of every 3 months for 10
years. If interest is 4.5% compounded semi-annually and if he leaves the accumulated balance
for another five years, what will be the balance in his account then?

PMT

7. What payment made at the end of each quarter for 15 years will accumulate to $12OOO at
6% compounded monthly?

8. Mr. and Mrs. White applied to their credit union for a first mortgage of $190 OOO
a. to buy a house. The mortgage is to be amortized over 25 years and interest on the
b. mortgage is 4. 9% compounded semi-annually. What is the size of the monthly
payment if payments are made at the end of each month?

9. Mirsad is saving $500 at the end of each month. How soon can he retire if he wants to have a
retirement fund of$120 OOO and interest is 5.4% compounded quarterly?

10. To repay a loan of$35 OOO, Arial Company pays out $6000 at the end of each year. If
interest on the loan is 8% compounded quarterly, how many payments will it take to repay the
loan?
Answer key!

1. 10041.88
2. Ans
a. 12158.726
b. 2061.274
3. The lump sum cash offer is $233.27 higher than the quarterly payments offer.
4. 15252.94780
5. Ans
a. 13265.50
b. 3265.50
6. $31292.63
7. $124.41
8. 1094.26
9. 13 years, 8 months
10. 15 years, 6 months

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