Section 5 4 Annuities Present Value and Amortization

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Section 5. 4 Annuities, Present Value, and Amortization Copyright © 2015 Pearson Education, Inc.

Section 5. 4 Annuities, Present Value, and Amortization Copyright © 2015 Pearson Education, Inc. All right reserved.

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 2

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 2

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 3

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 3

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 4

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 4

Future Value of an Annity Copyright © 2015 Pearson Education, Inc. All right reserved.

Future Value of an Annity Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 5

Example: Solution: Jim Riles was in an auto accident. He sued the person at

Example: Solution: Jim Riles was in an auto accident. He sued the person at fault and was awarded a structured settlement in which an insurance company will pay him $600 at the end of each month for the next seven years. How much money should the insurance company invest now at 4. 7%, compounded monthly, to guarantee that all the payments can be made? The payments form an ordinary annuity. The amount needed to fund all the payments is the present value of the annuity. Apply the present-value formula with (the interest rate per month). The insurance company should invest Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 6

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 7

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 7

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 8

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 8

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 9

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 9

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 10

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 10

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 11

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 11

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 12

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 12

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 13

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 13

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 14

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 14

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 15

Copyright © 2015 Pearson Education, Inc. All right reserved. Slide 1 - 15