# How to solve annuity problems

Finance Calculator

Texas Instruments 83

a. Future Value of a Regular Annuity

What is the Future Value of 10 equal end of period payments of \$100 each, invested at an annual interest rate of 10 percent

Compounding should remain at P/Y = 1. C/Y = 1.

Enter number of years: N = 10

Enter interest rate: i = 10 (press 10 and then I/Y)

Enter payment: PMT = -100 ((-) can be found next to then ENTER key)

Not using Present Value key: PV = 0

Calculate unknown: ALPHA (the green key), SOLVE (above the ENTER key) FV. answer is \$1,593.742

b. Unkown: Number of years .

\$1,593.74 is needed sometime in the future. How long, investing \$100 per year, earning 10 percent annually, would it take to amass this amount of money?

Compounding should remain at P/Y = 1 and C/Y = 1

Enter interest rate: i = 10

Enter payment: PMT = 100

Enter Future Value: FV = -1593.74

Not using Present Value key: PV = 0

Calculate unknown: ALPHA, SOLVE, N. answer is 9.999 (round to 10)

c. Unkown: Interest rate needed

To obtain an amount of \$2000.00 ten years from now, earning 10 percent annually, what amount would have to be invested on a yearly basis?

Compounding should remain at P/Y = 1 and C/Y = 1

Enter Future Value: FV = -2000.00

Enter Present Value: PV = 0

Enter number of years: N = 10

Enter interest rate: i = 10

Calculate unknown: ALPHA, SOLVE, PMT. answer is \$125.49

e. Present Value of a Regular Annuity

What is the present value of a 4 year annuity, with payments of \$100 earning 10 percent annually?

Compounding should remain at P/Y

= 1 and C/Y = 1

Enter number of years: N = 4

Enter Interest Rate: i = 10

Enter Payments: PMT = \$-100

Enter Future Value: FV = 0

Calculate unknown: ALPHA, SOLVE, PV. answer is \$316.99

*** The previous problems all deal with a regular annuities. The next set deals with an annuity due. The difference being that with an annuity due, payments are made at the beginning of the compounding periods.

Annuities Due: Time Value of Money Problems using equal beginning of period payments.

To change the setting on the calculator from regular to annuity due:

Change the PMT from E: Pmt_End to F: P_Begin

What is the Future Value of ten equal beginning of period payments of \$100 each, invested at an annual interest rate of 10 percent.

Compounding should remain at P/Y = 1. C/Y = 1 .

Enter number of years: N = 10

Enter interest rate: i = 10

Enter amount of payments: PMT = -100 ((-), which can be found next to the ENTER key.)

Enter Present Value: PV = 0

Calculate unknown: ALPHA, SOLVE, FV. answer is \$1,753.12

b. Unknown: Number of years

\$1,753.12 is needed sometime in the future. How long, investing \$100 per year, earning 10 percent annually, would it take to amass this amount of money?

Compounding should remain at P/Y = 1 and C/Y = 1

Enter interest rate: i = 10

Enter payment: PMT = 100

Enter Future Value: FV = -1753.12

Not using Present Value key: PV = 0

c. Unkown: Interest rate needed

To obtain an amount of \$3000.00 ten years from now, earning 10 percent annually, what amount would have to be invested on a yearly basis in an annuity due form?

Source: homepages.wmich.edu

Category: Credit