3.6 Annuity Present Value

Colin would like to deposit enough money in a savings annuity today, paying 11% per annum, compounded annually, so that he can make $7000 withdraws at the end of each year for the next 8 years. How much must he deposit now?

• $36,022.86

• $53,284.55

• $7000
• $47,295.19

Tanner would like to be able to withdraw $6500 every 6 months for the next 3 years for college. How much must he deposit into his savings annuity today if it pays 5% compounded semi-annually?

• $32,194.38

• $28,405.29

• $6,500

• $35,802.81

A new gaming computer is financed so that you only have to make payments of $175 every 3 months over the next 7 years. If interest compounds at 12% quarterly, what is the computer's present value?

• $175

• $3,283.72

• $2,683.55

• $5,862.59

Mr. On would like to be able to withdraw $2500 each month for 20 years during his retirement. How much must he have in his savings annuity if it pays 6% compounded monthly?

• $348,951.93

• $371,485.38

• $438,184.91

• $506,385.28

In order to finance a car, you make monthly payments of $380 for the next 10 years at 4% compounded monthly. How much will you pay in interest over the next 10 years?

• $7,996.77

• $3,583.49

• $10,398.34

• $9,488.25

Select all correct answers.

Businesses offer present value annuities in the form of financing options so that:

• The customer doesn't have to pay everything up front.

• Businesses can profit off of payment interest.

• The customer can save money in the long run.

• Businesses can save money in the long run.

• The customer can pay everything up front.

Select all correct options.

Individuals can use present value annuity to:

• Make a one-time lump sum withdraw.

• Make several withdraws over time

• Gain interest on savings

• Lose interest on savings

• Paying large loans over time, in smaller chunks, but paying more interest