Anyone know how to do Annuities?

[emptywallet]

ok, does anyone know how to do annuity problems? I have all the formulas, I just can't figure out which one to use for this problem. I know Annuity Due is for the begginning of a period, and Ordinary Annuity is for the end of a period, so which would this be? Annuity Due, or Ordinary Annuity?

""A relative wills you an annuity paying $4000 a year for the next 10 years. The first payment is one year from now and the money is invested at 8% compounded annually. ""

Annuity Due or Ordinary Annuity?

 

[vinylgroover]

It's an ordinary annuity because the question states that the first payment is one year from now ie, at the end of year one. If it was an annuity due, the first payment would be made at the commencement of the time period, ie Year 0.

 

[emptywallet]

It's an ordinary annuity because the question states that the first payment is one year from now ie, at the end of year one. If it was an annuity due, the first payment would be made at the commencement of the time period, ie Year 0.

So would I use the formula for Future value or present value. And please explain why. This is the gist I have, future value annuities are something you pay into, and the future value is the sum of all the payments and interest. Present value is something that you recieve from, and the present value is the total amount required to purchase that annuity. So which one did you use and why? Am I correct in saying these statements?

 

[HUGHJORGEN]

this got me thinking back to college, as I was for a time a math major- I remember having this shit as homework. I tried to remember it and remembered I copied all my homework from a fat chick, so I cannot help- the fat chick prolly could though!

 

[spentagn]

So would I use the formula for Future value or present value. And please explain why. This is the gist I have, future value annuities are something you pay into, and the future value is the sum of all the payments and interest. Present value is something that you recieve from, and the present value is the total amount required to purchase that annuity. So which one did you use and why? Am I correct in saying these statements?

PV is the amount of money you have/need to have to get a known total amount in the future, discounted at the assumed interest rate. The easiest example is a car payment. You know how much it will be w/ TTL, and you want to know what your payments will be.

FV is the amount you'll have in the future assuming a stream of payments and knowing the value of the payments.

You didn't state the question in the original post.

 

[vinylgroover]

It all depends on what the question asks.

The future value is basically the amount which accumulates when a series of present value payments are at invested at a compounding rate of interest.

The question is asking what future value will periodic payments of $4,000 invested for 10 years at 8%, in arrears amount to.

 

[HUGHJORGEN]

where's a fat chick when you need one??

 

[vinylgroover]

this got me thinking back to college, as I was for a time a math major- I remember having this shit as homework. I tried to remember it and remembered I copied all my homework from a fat chick, so I cannot help- the fat chick prolly could though!

Did her paper have jelly donut and saliva stains on it