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Annuities, Compounds Interest and Sinking Funds

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Joseph wants to deposit $1,500 at year-end for 35 years at 8%. What will his result be? If Joseph deposits $1,000 at the end of each year for the next 5 years at 8% compounded annually, $1,500 at the end of years 6-10 at 8% compounded annually, and $2,000 at the end of years 11-35 at 5% compounded annually, how much would he accumulate at the end of 35 years? Assume that any balances from earlier deposits would continue to earn the same rate of annual interest.

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Formula for calculation of future value of annunity=
S = R[ (1+i)^n -1]/i
Where, S = future valuation
R = periodic payment
i = Interest rate per period
n= number of periods
Here, R= $1500
n = 35
So, S= 1500[ {1+(8/100)}^35 -1]/(8/100) = $258475.21

In the first case, R1= $1000

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There are many terms used in the world of financial mathematics. It is important that these terms and their calculations are understood before working with the financial institution and the advertising team.

For this Discussion Board, use the library, Internet, and other resources to discuss the following financial terms, and give an actual calculated example of each:

Compound Interest and Simple Interest
1) Present Value, Annuities, and Amortization
2) Future Value and Sinking Funds
3) Give examples of specific organizations or individuals that may wish to utilize these concepts. Explain how and why they may want to use these concepts.

Objective: Illustrate compound interest formulas, using them to find future values and present values of a dollar; explain annuities and find the future value or present value of an annuity; illustrate amortization of certain types of installment loans and sinking funds.

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