MATH 1095 - week 1 This lesson is

being
Agenda recorded.
❑ Course information and overview
❑ Sections 11.1, 11.2, 11.3

Objectives
❑ Math 1008 skills to recall
❑ Definition of annuity
❑ Calculate future value, present value
o Formulas
o BA II+ calculator keys

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MyLab Math and e-text
❑ E-text same as previous course(s)
❑ Practice questions, online
assignments from MyLab Math
❑ Pair your Blackboard with MyLab
Math
❏ See instructions in Welcome
announcement

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Success in online learning
❏ Stay current
❏ Plan for the unexpected (survey)
❏ Blend your coursework into your life
❏ Be a professional student

❏ Increased self-study
❏ Increased responsibility
❏ MyLab Math
❏ TI BA II+ calculator

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Skills from MATH 1008
❑ Compound interest e.g. the term is 2 years, and the interest is 9%...

❏ n-value a) compounded annually: i = ___%, n = ___

❏ i- value
b) compounded semi-annually

❑ Timelines c) compounded monthly

❑ Calculator skills
d) BB POLL
❑ Rounding

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11.1 Ordinary simple annuities, intro
❑ in MATH1008 had ‘payment’ questions
one-time only deposit unequal payments,
(investment or loan) irregular intervals
e.g. e.g.

o key concept: time value of money

o relied on dated values of each amount at ________ date
o PV = __________ and FV = ___________
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11.1 Ordinary simple annuities, intro
❑ Definition of annuity
❏ series of payments
❏ equal size payments at periodic (regular) intervals
❏ annual, semi-annual, monthly, etc.
❑ Practical applications of annuities are widely encountered in
the finances of both businesses and individuals.
❏ Mortgages, loans, leases

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11.1 Ordinary simple annuities, intro
❑ Types of annuities
Annuity
Equal payments at regular
intervals of time

Ordinary Annuity
Payments are made at the end of
each payment period
(Chapters 11 & 12) (Chapter 13)

Ordinary Ordinary
Simple Annuity General Annuity
Compounding Compounding (Chapter 13) (Chapter 13)
frequency and frequency and
payment period are payment period are
the same. not the same.
(Chapter 11) (Chapter 12)
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11.2 Ordinary simple annuities, FV
❑ timeline visualization of finding future value (FV) of an annuity
❑ Scenario: $1000 deposits at the end of each year for 5 years, at
6% compounded annually, find FV of annuity

0 end of 1 end of 2 end of 3 end of 4 end of 5

$1000 $1000 $1000 $1000 $1000
____ year
____ years
___ years
___ years

❑ FV = total FV’s for each $1000 deposit

= __________ + __________ + __________ + __________ + _______
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11.2 Ordinary simple annuities, FV
❑ Calculating each FV individually is tedious!
❑ FV formula for an annuity calculates this total FV for all the
payments:

𝒏
𝟏+𝒊 −𝟏
FVn = PMT 𝒊

FVn = future value of an ordinary simple annuity

i = interest rate per conversion period
n = number of periodic payments
PMT = payment per period 15
11.3 Ordinary simple annuities, PV
❑ timeline visualization of finding present value (PV) of an annuity
❑ Scenario: $700 withdrawals at the end of each year for 5 years, at
8% compounded annually, find PV of annuity

0 end of 1 end of 2 end of 3 end of 4 end of 5

$700 $700 $700 $700 $700
___ year
___ years
___ years
___ years
___ years

❑ PV = total PV’s for each $700 deposit

= __________ + __________ + __________ + __________ + ___________
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11.3 Ordinary simple annuities, PV
❑ Calculating each PV individually is tedious!
❑ PV formula for an annuity calculates this total PV for all the
payments:

−𝒏
𝟏 − 𝟏+𝒊
PVn = PMT 𝒊

PVn = present value of an ordinary simple annuity

i = interest rate per conversion period
n = number of periodic payments
PMT = payment per period 18
11.3 Ordinary simple annuities, PV
❑ Present value scenarios and uses
o PV as the amount borrowed for a loan
o PV as the cash value (initial value) of a product/service
o PV as initial amount invested, where periodic
payments withdrawn over a term

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11.2 and 11.3 – using BA II+ calculator
Set-up 6 variables to find 7th variable.
set up first 2ND I/Y ENTER
P/Y = payments per year 
C/Y = conversion/compounding
periods per year

N= number of periodic payments (#years x P/Y)

I/Y = interest rate per year (nominal interest rate, j)

PMT = payment per period

finding PV finding FV
set FV = 0 set PV = 0
CPT PV CPT FV 22
11.2 and 11.3 – using BA II+ calculator
❑ Before entering values, clear your calculator
o Find CLR TVM by pressing 2ND FV

❑ Always set P/Y and C/Y first

❑ For all of chapter 11 (simple annuities),
P/Y = C/Y
o Payment periods and compounding
periods are the same

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MyLab Math Assignment 1
• Available today
• Expires at midnight Tuesday
• 4 questions, 3 attempts
• 1 hour time limit
• Must be done in one visit
• Read “instructor tip” and read
each question carefully

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Recap
❑ Course overview
❑ Review of MATH 1008 skills
❑ Ordinary simple annuities
o 11.1 introduction
o 11.2 finding FV
o 11.3 finding PV

❑ Calculator skills
❑ Recommended exercises
e-text MyLab Math

11.2, p. 430 #9 – 17, odds only Study Plan 11.2 PRACTICE & QUIZ ME
11.3, p. 440 #3, 5, 7, 15, 19 Study Plan 11.3 PRACTICE & QUIZ ME

❑ MyLab Math and calculator asap 27