Annuity investments demand regular equal deposits into an investment

Simple Regular annuity Deposits are on the same timeline as the interest calculations (simple annuity) First deposit is made at the end of the conversion period (ordinary or regular annuity) Recall a conversion period is the schedule of the time interval for interest calculations.

$600 is invested every 6 months, starting 6 months from now into an account paying 2.5%/a compounded semi-annually for three years. What total amount of interest is earned? To solve this problem we Draw a timeline; Write the series; Calculate the total amount:using formula or TVM solver, Calculate the interest earned

Timeline: to interpret the given Deposit > > > > > > > > > > Earnings This last deposit has not yet had any time to earn interest.

Geometric Series: a = 600 and r = and n = 6 Calculation of total amount of investment Calculation of total amount of interest Interest $ earned = $ – 6($600) = $114.39

$600 is invested every 6 months, starting 6 months from now into an account paying 2.5%/a compounded semi- annually for three years. Ti83+: apps, 1:Finance, 1:TVM solver N= the number of conversion periods, (2 per year)(3 years)N = 6 I = yearly interest rate, I = 2.5 PV = 0, because this is an annuity PV = 0 PMT= -600, negative because you hand over $600 every 6 months PMT = FV=0 at first, FV= 0, then FV = $ then use alpha enter to solve P/Y = 2, you make 2 payments per year (semi-annually) P/Y = 2 C/Y=2, two interest calculations per year (semi-annually) C/Y = 2 PMT: END is highlighted for ordinary/simple annuity PMT:END