V.9:12 (479-481): SIDEBAR: FIGURING THE NUMBER OF PERIODS IN AN ANNUITY
Product Description
FIGURING THE NUMBER OF PERIODS IN
AN ANNUITY
Often, investors anticipate a need for a given amount of funds at some future date. One way to guarantee that such funds will be available is to put aside a series of payments at predetermined intervals, known as an annuity. When the payments are made at the beginning of the period, the' series is known as an annuity due. When made at the end of the period, as assumed here, the series is an ordinary annuity.
The value of an ordinary annuity is the sum to which the payments would accumulate, assuming that all are invested at some fixed compound interest rate immediately on being put into the annuity. Specifically, if equal payments of P dollars are put aside for n periods and the payments grow at r% compounded each period, the value of this annuity (s) is:
Often, investors anticipate a need for a given amount of funds at some future date. One way to guarantee that such funds will be available is to put aside a series of payments at predetermined intervals, known as an annuity. When the payments are made at the beginning of the period, the' series is known as an annuity due. When made at the end of the period, as assumed here, the series is an ordinary annuity.
The value of an ordinary annuity is the sum to which the payments would accumulate, assuming that all are invested at some fixed compound interest rate immediately on being put into the annuity. Specifically, if equal payments of P dollars are put aside for n periods and the payments grow at r% compounded each period, the value of this annuity (s) is:
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