Copyright © 2008 Pearson Education Canada 12-1 Chapter 12 Ordinary General Annuities Contemporary Business Mathematics With Canadian Applications Eighth.

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Presentation transcript:

Copyright © 2008 Pearson Education Canada 12-1 Chapter 12 Ordinary General Annuities Contemporary Business Mathematics With Canadian Applications Eighth Edition S. A. Hummelbrunner/K. Suzanne Coombs PowerPoint: D. Johnston

Copyright © 2008 Pearson Education Canada 12-2 Objectives After completing chapter twelve, the student will be able to: Compute the future value (or accumulated value) for ordinary general annuities. Compute the present value (or discounted value) for ordinary general annuities. Compute the payment, number of periods, and interest rate for ordinary general annuities.

Copyright © 2008 Pearson Education Canada 12-3 General Annuity Length of interest conversion period is different from the length of the payment interval. In Canada, home mortgages are usually compounded semi-annually and payments are often made on a monthly, semi-monthly, or weekly basis.

Copyright © 2008 Pearson Education Canada 12-4 Ordinary General Annuity

Copyright © 2008 Pearson Education Canada 12-5 Relationship between Payment Interval and Interest Conversion Period

Copyright © 2008 Pearson Education Canada 12-6 Two Cases-Ordinary General Annuities

Copyright © 2008 Pearson Education Canada 12-7 Determining the value of c

Copyright © 2008 Pearson Education Canada 12-8 Effective Rate of Interest per Payment Period

Copyright © 2008 Pearson Education Canada 12-9 Calculating Effective Rate p

Copyright © 2008 Pearson Education Canada Formula for the Future Value of an Ordinary General Annuity

Copyright © 2008 Pearson Education Canada Finding FV or Accumulated Value

Copyright © 2008 Pearson Education Canada Find the Future Value Using the Future Value Formula

Copyright © 2008 Pearson Education Canada Electronic Calculator Solution

Copyright © 2008 Pearson Education Canada Present Value of Ordinary General Annuity

Copyright © 2008 Pearson Education Canada Finding PV of an Annuity

Copyright © 2008 Pearson Education Canada Calculating PV

Copyright © 2008 Pearson Education Canada Electronic Calculator Solution

Copyright © 2008 Pearson Education Canada Using a Preprogrammed Calculator to Find PV or FV of an Ordinary General Annuity

Copyright © 2008 Pearson Education Canada Finding PMT When the Future Value Is Known

Copyright © 2008 Pearson Education Canada Find PMT Using the Electronic Calculator

Copyright © 2008 Pearson Education Canada Finding PMT When Present Value Is Known

Copyright © 2008 Pearson Education Canada Finding PMT on Electronic Calculator When PV Is Known

Copyright © 2008 Pearson Education Canada Finding i

Copyright © 2008 Pearson Education Canada Calculator solution (continued)

Copyright © 2008 Pearson Education Canada Summary In an ordinary general annuity, the payment interval and interest conversion interval do not coincide.(i.e. General) It is necessary to calculate an equivalent rate of interest so that the payment interval and interest conversion interval do coincide.