Annuity due

I will invest $500 per quarter for my retirement at 7.3% compounding quarterly for 32 years. I

have a choice of making that payment of $500 at the beginning or the end of the quarter . Find Annuity
due.

Calculator: 500((1+.073/4)^(4*32+1)-1)/(.073/4) – 500

FV = $254543.36

Interest = 254543.36 – (128*500) = $190543.36

Deferred Annuity

1. Have I got a deal for you! If you lend me $100,000 today, I promise to pay you back in twenty-
five annual installments of $5,000, starting five years from today (that is, my first payment to
you is five years from today). You can earn 6% on your investments. Will you lend me the
money?

This is a deferred annuity problem

CF = $5,000

N = 25

i = 6%

PV4 = $5,000 (PV annuity factor for N=25 and i=6%)

PV4 = $5,000 (12.7834)

PV4 = $63,916.78

PV0 = $63,916.78 / (1 + 0.06)4 = $50,628.08

You probably shouldn't lend the money under these terms. If you lend me $100,000,
I am repaying you using terms such that the value of my repayment is $50,628.08.