Present Worth of Annuities make equal payments The present value of an annuity that pays out n regular payments of $R at the end of each time period from an account with an interest rate of i per time period is: (plus interest) Future worth of annuity (lump sum) withdraw equal amounts (while earning interest) Present worth of annuity (lump sum)

Example 1 From a settlement, you will be awarded $1000 at the end of every month for the next 30 years paid from an annuity earning interest at an annual rate of 6%. What amount must be in the account to achieve this goal?

Annuity Due Present Value of Annuity Due – when the payouts occur at the beginning of each time period. Example 2 $1,260,000 Jackpot winner gets a choice of: a) $3500/month for 30 years paid at the beginning of each month with 7.5% annual rate b) Lump sum of the present value

Tom and Alice inherit $100,000 and put this into an annuity paying out at the start of each month for 5 years with interest of 6.3%, compounded monthly. How much will they receive each month? Example 3 If they get an annuity paying 7.2%, how long will the same payout last?