Videos: Introduction to Annuities

What is an Annuity?

 

  1. 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?

 

  1. 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)

 

  1. 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?

 

  1. 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?

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