1. Lesson 2 – Annuities Learning Goal I can solve for the future value of an annuity

2. Lesson 2 – Annuities What is an annuity? Annuity: Equal payments (or deposits) made at regular intervals. For example, regular deposits into a savings account.

3. Lesson 2 – Annuities Simple Annuity: A type of annuity when the payments (or deposits) match the compounding period Ordinary Annuity: A type of annuity whose payments are made at the end of each compound period *All of the annuities we will look at will be simple, ordinary annuities.

4. Lesson 2 – Annuities Formula for calculating the Future Value of an annuity: FV is the amount (future value) in dollars R is the regular payment or deposit that is made, in dollars i is the interest rate per compounding period, as a decimal n is the total number of deposits

5. Lesson 2 – Annuities Example 1: To help pay for your first home, you have decided to make monthly deposits of $100 into a savings account that has a compound interest rate of 2% per year, compounded monthly. How much money will you have after 10 years?

6. Lesson 2 – Annuities Example 2: Ethan and Phillip are having a race to see who can make the most money in 5 years. Ethan has decided to put $6000 into a savings account with 1.5% per year compound interest (compounded weekly). Phillip is going to invest $25 a week into a savings account, also with 1.5% interest per year compounded weekly. After 5 years, who has the greater amount? EthanPhillip

7. Lesson 2 – Annuities Example 3: Lindsay wants to have $15,000 in 7 years so that she can buy herself a car. She has set up a savings account that will pay 4.5% interest per year, compounded quarterly. What are the regular quarterly deposits that Lindsay needs to make into the account in order to have $15, 000 in 7 years?

8. Lesson 2 – Annuities Practice  Pg. 511 #2, 6, 8, 9, 10