1. Copyright ©2015 Pearson Education, Inc. All right reserved. Section 5.4  Annuities, Present Value, and Amortization

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

6. Slide 1 - 6 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? Solution: Copyright ©2015 Pearson Education, Inc. All right reserved. Example: 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

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