Videos: Introduction to Annuities
What is an Annuity?
- You decide to begin a savings plan. Starting in one year you will deposit $100 each year into an account that pays j1= 12%. How much will you have in 3 years? How much of that is interest?
- Financial planners estimate you will require an income of $2,500 per month to retire. You dial 1-800-psychic and discover you will live another 15 years. How much money will you need to retire if your first withdrawal will be in one month? (interest is 9% compounded monthly)
- You have just purchased a new house for $250,000. You can afford to pay $2,600 per month on your mortgage. How long will it take you to pay off your house if interest is calculated at 12% compounded monthly?
- Your new car loan has payments of $499 at the end of each month for 5 years to pay for a $25,000 Mercury Stable. What rate of interest is being charged? What is the effective rate? What is the cost of financing?
