When you need to save money for a large purchase or save money for retirement, you typically make regular payments into an account that earns interest. This series of payments is called an annuity.
If the regular payments are made at the beginning of a period of time, the annuity is called an annuity due. If the regular payments are made at the end of a period of time, the annuity is called an ordinary annuity. In this section we will examine the relationship between the future value of the annuity, the size of the payment, and the period of time over which the payments are made.
Our objectives in this section are to
- Calculate the future value of an ordinary annuity.
- Calculate different quantities in a sinking fund.
Use the workbook and videos below to help you accomplish these objectives.
Section 5.4 Workbook (PDF) 11/2/19