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MCR3U

- Unit 2 - Intro to Functions
- Test2_V2_AnswerKey
- Rational Functions - Grade 12 BOSS
- Test2_V1_AnswerKey
- MCR3U Unit 6 Test Answers
- MCR3U Unit 5 Answers
- Assignment #4 V2
- Assignment #4 V1
- 9.1 Review Assignment
- 8.5 8.6 Annuities - Present Value
- 7.2 7.6 Geometric Sequences Series
- 7.1 7.5 Arithmetic Sequences Series
- 6.8 Review
- 6.7 Applications of Sinusoidal Functions
- 6.6 Equations
- 6.4 6.5 Transformations Completed Notes
- 6.2 6.3 Interpreting Sinusoidal Functions
- 5.9 Unit Review
- 5.8 More 3D Trig Answers
- 5.8 More 3D Trig

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MCR3U - Unit 8: Discrete Functions: Financial Applications Date:
8.3 Compounded Interest: Present Value
8.4 Annuities: Future Value
H-mework:
hursday: 6.3 Pages 498-499: #4, 7,9, 10, 13, 14
Friday: 8.4 Pages 511-512: #3, 6,8, 10, 12
At the end of this lesson | will be able to:
* Calculate present value (PV) and interest rates (i) for compounded interest
+ Draw timelines and calculate future value (FV) for simple ordinary annuities
Compounded Interest: Present value (8.2) versus Future Value (8.3)
Euture value is the total amount, 4, of an investment after a certain period and can be determined using the
formula for compounded interest (8.2). Presentvalue is the principal that would have to be invested now to
geta specific value in a certain amount of time. We can find this value by rearranging the formula in 8.2 to
find P and using the variable PV instead.
t
So if we take A=P(1+z)" and rearrange for P we get:
b= 0.05
n= 10
Fy = /S000
Frys?
1. Determine the present value of Alex's investment if it must be worth $15 000 ten years from now
assuming an annual compounding period with a rate of 5%/a.
Note: These calculations don't include the time value of money. Basically $10 today is worth more than the
same $10 twenty years in the future for @ variety of reasons including:
«Inflation ~ the rise in the general level of price of goods and services in an economy
+ Opportunity cost - what you miss out on when you choose to do one thing over another. For example,
if you spend $10 on dinner, you miss out on the benefit of being to use that $10 for anything else
(depositing it into a savings account and making interest).
Ifyou are interested in courses in finance or economics, you will examine these factors in more detail.
8.4 Annuities: Future Value 7
9.6% 7
What happens if you decide to deposit $150 into a savings account that earns 925% /a compounded monthly
at the end of each month starting July 31 until December 31° How much is it worth on January 15
We can draw a timeline to illustrate what Is happening one
compounding 2 1S) 2/8) BE) BS Ech) z
a = a8
payen’ 180 9 SI tim
| Lwo ,
| | L 50( 40-009)
) oL — (50 (1+0.008) 7
¢ 5>
| 39.(149.008)
\ _ 150 (1+0.008)
y i 5S
Azpciti) \S0 (1+0.008)An annuity is a series of payments or investments made at regular intervals (typically monthly, quarterly,
semi-annually or annually). Annuities may be equal deposits, equal withdrawals, equal payments, or equal
receipts - the key is equal cash flow in or out at regular intervals.
‘There are several different types of annuities based on:
ncide and are caled simple annuities. For
sample, payments are mace monthly AND the
ingerest is compounded moathy.
if the payments are made at:
the beginning ofthe each compounding period and
are called annuity.dives.
«the time value of money where
f° ‘the future value is the sim ofa regular payments
and interest earned. Examples include RRSPs and
| RESPS,
We will only look at the future value (FV) (8.4) and present value (PV) (8.5) or simple ordinary annuities in
this course.
if the payment intervals andl interest conversion periods (or compounding periods}:
not coincide and are called general annuities
For example, payments are made monthly BUT the
id semi-annually,
‘or the present value is the value of the annuity atthe
Doginniag of the torm and is the sum of all prosent
values of the payment. Examples include mortgages,
credit card debt with even payments and lines 0
credit
Future value: The amount that accumulates is called the future value and is the sum ofa geometric series.
Compound ing 4 :
2 na ml on amount thot each paymunt
Ingeneral: Peed | mou ch pay mint
$1 4 Is wort at ti
Pym 2 7R *R 2 2 RR 2nd of Hu fern
| } Least) wy
| L Resi) i%
The sum of the geometric series:
Sn = Re RCH) + ROCF +
See SET gover le
ON yy sum of a
~ Qeomeltic.
= Rar"-1] Segunce
pt
Cs "—AD | c= payment
. Jeremy
ev compounding period
ra bed & common
Fan
Ist Grade B. He has a paper route and wants to save for his college education. He determines
that he can deposit $100 a month into an account that pays 39/2, compounded monthly. How much
will he have at the end of five years (when he graduates high school) for his education.
a
of 5 years.
Draw a timeline showing the amount paid each month, and the value of each payment at the end
D. Show that the total amount of the annuity after 5 years forms a geometric series.
c. Calculate the sum of the series.
Ms. Choo wants to save $40 000 for the down payment on a new home. She would like to deposit an
equal amount of money at the end of every 3 month period for the next § years into an account that
pays 2.75%/a compounded quarterly. Use a timeline to represent this process and calculate what her
deposit should be to reach her goal.

- Unit 2 - Intro to FunctionsUploaded byBradley Singh
- Test2_V2_AnswerKeyUploaded byBradley Singh
- Rational Functions - Grade 12 BOSSUploaded byBradley Singh
- Test2_V1_AnswerKeyUploaded byBradley Singh
- MCR3U Unit 6 Test AnswersUploaded byBradley Singh
- MCR3U Unit 5 AnswersUploaded byBradley Singh
- Assignment #4 V2Uploaded byBradley Singh
- Assignment #4 V1Uploaded byBradley Singh
- 9.1 Review AssignmentUploaded byBradley Singh
- 8.5 8.6 Annuities - Present ValueUploaded byBradley Singh
- 7.2 7.6 Geometric Sequences SeriesUploaded byBradley Singh
- 7.1 7.5 Arithmetic Sequences SeriesUploaded byBradley Singh
- 6.8 ReviewUploaded byBradley Singh
- 6.7 Applications of Sinusoidal FunctionsUploaded byBradley Singh
- 6.6 EquationsUploaded byBradley Singh
- 6.4 6.5 Transformations Completed NotesUploaded byBradley Singh
- 6.2 6.3 Interpreting Sinusoidal FunctionsUploaded byBradley Singh
- 5.9 Unit ReviewUploaded byBradley Singh
- 5.8 More 3D Trig AnswersUploaded byBradley Singh
- 5.8 More 3D TrigUploaded byBradley Singh
- 5.8 3D Trig Completed Notes AnswersUploaded byBradley Singh
- 5.7 HW Practice Q AnswersUploaded byBradley Singh
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