Question

4. Maria and John decide to save for retirement with an annuity. Answer each of the following questions separately, showing all your work to reach each answer. А. Maria has found an annuity that pays 1.5% compounded monthly. If they made a deposit of $200 each month, what would be the total value of this annuity at the end of 30 years if interest rate remains the same? b. how much interest will they have earned? B. John has found an annuity that pays 2.5% compounded semi-annually. If they made a deposit of $1200 every six months, what would be the total value of this annuity at the end of 30 years if interest rate remains the same? b. how much interest will they have earned?

Answer 1

- X Fax 4(A) monthly payment total months monthly interest rate total value of this annuity at the end of 30 years total amount deposited interest they have earned $ 200 360 0.125% $ 90,859.44 $ 72,000 $ 18,859.44 60 semiannual payment $ 1,200 total semiannual periods semiannual interest rate 1.250% total value of this annuity at the end of 30 years $ 106,289.41 total amount deposited $72,000 interest they have earned $ 34,289.41

for formulas and calculations, refer to the image below -

X fx 4 (A) monthly payment 200 total months =30*12 monthly interest rate =1.5%/12 total value of this annuity at the end of 30 years =FV(D4,D3,-D2) total amount deposited =D2*D3 interest they have earned =D5-D6 semiannual payment 1200 total semiannual periods =30*2 semiannual interest rate =2.5%/2 total value of this annuity at the end of 30 years =FV(D11,D10,-D9) total amount deposited =D9*D10 interest they have earned =D12-D13

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