MAP4C Mr.

Nguyen
Name: ________________________________
Chapter 7 – Annuities and Mortgages
Lesson: 7.1 – The Amount of an Annuity
Homework: Page 406 #1, Page 404 #2, Page 415 #1a, 2, 3c, 5, 6, 11
Review:
Simple Interest (INTEREST IN 1 PERIOD) Compound Interest (INTEREST in MANY)

Formula: I = Prt Formula: 𝐴 = 𝑃(1 + 𝑖)𝑛

I = _________________________________ A = _________________________________

P = _________________________________ P = _________________________________

r = _________________________________ i = __________________________________

t = _________________________________ __________________________________

n = __________________________________

For example: Wiz Khalifa invests $3000 for 3 years in a bond that earns 6% per year
compounded quarterly.
a) Determine how much Wiz makes after 3 years.

b) Determine how much interest does the bond earn?

______________________________________________________________________________

Lesson 7.1 Annuities

Annuity: ______________________________________________________________________

______________________________________________________________________________
Example 1: Using a table
Suppose $450 is deposited at the end of each quarter for 1.5 years in an investment account that
earns 10% per year compounded quarterly.
a) What is the amount of the annuity?

b) How much interest does the annuity earn?

The annual interest rate is ____________, so the quarterly rate is _________________________.

The number of quarters in 1.5 years is: ______________________________________________.

Quarter Starting Interest earned Deposit Ending

Balance ( ____ %) Balance

Totals:

a) The amount of the annuity is _____________________________.

b) The interest earned is ___________________________________.

Formula for Ordinary Simple Annuity

𝑅[(1 + 𝑖)𝑛 − 1]
𝐴=
𝑖

Example 2: Using the Amount Formula

In the annuity in Example 1, $450 is deposited at the end of each quarter for 1.5 years at 10% per
year compounded quarterly.
a) What is the amount of the annuity?

b) How much interest does the annuity earn?