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Gr12 Mathematics: Ch 3.3 Future Value Annuities
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Gr12 Mathematics: Ch 3.3 Future Value Annuities

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@TalentedParody

Questions and Answers

What is the primary characteristic of a future value annuity?

  • It involves making regular payments into an account that earns compound interest. (correct)
  • It involves a single lump sum payment at the end of the investment period.
  • It has a fixed interest rate that never changes.
  • It earns simple interest over the investment period.

    • What does the variable 'F' represent in the future value of an annuity formula?

  • Number of periods
  • Payment amount per period
  • Interest rate per period
  • Future value of the annuity (correct)

    • What is the formula for calculating the future value of an annuity?

  • $F = x \* [(1 + i)^n - 1]$
  • $F = x \* [(1 + i)^n - 1] / i$ (correct)
  • $F = x \* (1 + i)^n$
  • $F = x \* [(1 + i)^n - 1] / i^2$

    • What is the result of adding up all the payments made into an annuity account over time?

    <p>The sum of all payments</p> Signup and view all the answers

    What is the purpose of the interest rate 'i' in the future value of an annuity formula?

    <p>To adjust for the effect of compound interest</p> Signup and view all the answers

    If an annuity has a payment amount of $500 per quarter, and an interest rate of 2% per quarter, how would you calculate the future value of this annuity after 10 years?

    <p>Use the formula F = 500[(1 + 0.02)^40 - 1] / 0.02</p> Signup and view all the answers

    What happens to the future value of an annuity if the payment amount increases, but the interest rate remains constant?

    <p>The future value of the annuity increases</p> Signup and view all the answers

    An annuity has a payment amount of $1,000 per year, and an interest rate of 5% per year. If the interest rate increases to 6% per year, what happens to the future value of the annuity?

    <p>The future value of the annuity increases</p> Signup and view all the answers

    What is the relationship between the number of periods (n) and the future value of an annuity?

    <p>As the number of periods increases, the future value of the annuity increases</p> Signup and view all the answers

    If an annuity has a payment amount of $200 per month, and an interest rate of 3% per year, what would you need to do to calculate the future value of this annuity after 5 years?

    <p>Convert the interest rate to a monthly rate, and use the formula F = 200[(1 + 0.025/12)^(12*5) - 1] / (0.025/12)</p> Signup and view all the answers

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