The Mathematics of Money

(Darren Dugan) #1

140


Learning Objectives


LO 1 Recognize fi nancial situations that can be
described as annuities, and distinguish between
present and future values and between ordinary
annuities and annuities due.

LO 2 Calculate the future value of an annuity, using
annuity factors obtained from formulas, tables,
and/or calculator or computer programs.

LO 3 Find the payments necessary to accumulate a
desired future value goal, given a period of time
and interest rate.

LO 4 Calculate the present value of an annuity, using
annuity factors obtained from formulas, tables,
and/or calculator or computer programs.

LO 5 Find the annuity payments that are equivalent to
a specifi ed present value, given a period of time
and interest rate.

LO 6 Apply present and future value annuity calcula-
tions to real-world fi nancial situations, such as
long-term investment programs or loans.

LO 7 Construct amortization tables for loans, and use them
as a tool to illustrate and draw conclusions about the
workings of loan interest.

Chapter Outline


4.1 What Is an Annuity?

4.2 Future Values of Annuities

4.3 Sinking Funds

4.4 Present Values of Annuities

4.5 Amortization Tables

4.6 Future Values with Irregular Payments: The
Chronological Approach (Optional)

4.7 Future Values with Irregular Payments: The
Bucket Approach (Optional)

Annuities


“No man acquires property without
acquiring with it a little arithmetic also.”

—Ralph Waldo Emerson

CHAPTER


4

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