CALCULATOR HINTS ANNUITIES

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1 CALCULATOR HINTS ANNUITIES

2 CALCULATING ANNUITIES WITH THE FINANCE APP: Select APPS and then press ENTER to open the Finance application. SELECT 1: TVM Solver The TVM Solver displays the time-value-of-money (TVM) variables.

3 CALCULATING ANNUITIES WITH THE FINANCE APP: The TVM Solver displays the timevalue-of-money (TVM) variables. Enter all known information: You should have values for four of the five Finance variables and the 3 fixed values. Variables: N = number of payment periods I% = annual interest rate PV = present value PMT = payment amount FV = future value Fixed Values: P/Y = number of payment periods per year C/Y = number of compounding periods per year in the same transaction PMT: END BEGIN designates the payment method

4 EXAMPLE 1: Art Dull recently set up a TDA to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn 9 ¼ % interest. He just had his 30 th birthday, and his ordinary annuity comes to term when he is 65. Determine the following: a. The future value of the account b. Art s total contribution to the account c. The total interest

5 EXAMPLE 1: Art Dull recently set up a TDA to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn 9 ¼ % interest. He just had his 30 th birthday, and his ordinary annuity comes to term when he is 65. Determine: a. The future value of the account b. Art s total contribution to the account c. The total interest a. Enter known values. N = 26 * 35 (number of biweekly periods per year) * (number of years).

6 EXAMPLE 1: Art Dull recently set up a TDA to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn 9 ¼ % interest. He just had his 30 th birthday, and his ordinary annuity comes to term when he is 65. Determine: a. The future value of the account b. Art s total contribution to the account c. The total interest a. Enter known values. Solve for FV.

7 EXAMPLE 1: Art Dull recently set up a TDA to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn 9 ¼ % interest. He just had his 30 th birthday, and his ordinary annuity comes to term when he is 65. Determine: a. The future value of the account b. Art s total contribution to the account c. The total interest b. On the Home Screen, c. Calculate total contribution = total interest = n(pymts) * pymt. FV total contribution.

8 EXAMPLE 2: Determine the monthly payment into an ordinary annuity earning 8 7 / 8 % interest for a term of twenty years that will yield a future value of $45,000. Enter known values. Solve for PMT.

9 EXAMPLE 3: In June 2007, Manuel set up a TDA to save for retirement. He agreed to have $175 deducted from each of his monthly paychecks. The annuity s interest rate was allowed to change once each year. a. In 2007, the interest rate was 5.25%. Determine the account balance in June b. In 2008, the interest rate was 3.8%. Determine the account balance in June To do this, think of the June 2008 account balance as a lump sum that earns compound interest. c. In 2009, the interest rate was 2.2%. Determine the account balance in June 2010.

10 EXAMPLE 3: In June 2007, Manuel set up a TDA to save for retirement. He agreed to have $175 deducted from each of his monthly paychecks. The annuity s interest rate was allowed to change once each year. a. In 2007, the interest rate was 5.25%. Determine the account balance in June a. Enter known values. Solve for FV.

11 EXAMPLE 3: In June 2007, Manuel set up a TDA to save for retirement. He agreed to have $175 deducted from each of his monthly paychecks. The annuity s interest rate was allowed to change once each year. b. In 2008, the interest rate was 3.8%. Determine the account balance in June To do this, think of the June 2008 account balance as a lump sum that earns compound interest. b. Enter previous FV value Solve for FV. into PV (with a negative sign). Change the interest rate.

12 EXAMPLE 3: In June 2007, Manuel set up a TDA to save for retirement. He agreed to have $175 deducted from each of his monthly paychecks. The annuity s interest rate was allowed to change once each year. c. In 2009, the interest rate was 2.2%. Determine the account balance in June c. Enter previous FV value Solve for FV. into PV (with a negative sign). Change the interest rate.

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