Calculus II Homework

Section 12.2 Annuities: An application of Sequences

Problems 1-25 odd, 31, 33, 35, 37, 41, 43, 45, 47

Find the amount of each ordinary annuity. (Interest is compounded annually.)

1. R = $120, i = 0.05, n = 10

3. R = $9000, i = 0.06, n = 18

5. R = $11,500, i = 0.055, n = 30

Find the amount of each ordinary annuity based on the information given.
7. R = $10,500, 10% interest compounded semiannually for 7 years

9. R = $1,800, 8% interest compounded quarterly for 12 years

Find the periodic payments that will amount to the given sums under the given conditions
11. S = $10,000; interest is 8% compounded annually; payments are made at the end of each year for 12
years.

13. S = $50,000; interest is 12% compounded quarterly; payments are made at the end of each quarter
for 8 years.

Find the present value of each ordinary annuity.

15. Payments of $5000 are made annually for 11 years at 6% compounded annually.

17. Payments of $1400 are made semiannually for 8 years at 6% compounded semiannually.

19. Payments of $50,000 are made quarterly for 10 years at 8% compounded quarterly.

Find the lump sum deposited today that will yield the same total amount as payments of $10,000 at the
end of each year for 15 years, at the following interest rates. Interest is compounded annually.
21. 5%

23. 8%

Find the payments necessary to amortize each loan.

25. $2500, 16% compounded quarterly, 6 quarterly payments

Business and Economics

31. Amount of an Annuity Lynn Long deposits $12,000 at the end of each year for 9 years in an
account paying 8% interest compounded annually. Find the final amount she will have on deposit.

33. Sinking Fund Scott Perrine needs $10,000 in 8 years. What amount should he deposit at the end
of each quarter at 16% compounded quarterly to accumulate the $10,000?

35. Sinking Fund Jeanne Zalesky wants to buy a car that she estimates will cost $24,000 in 5 years.
How much money must she deposit at the end of each quarter at 12% interest compounded quarterly in
order to have enough to 5 years to pay for her car?

Individual Retirement Accounts With Individual Retirement Accounts (IRAs), a worker whose
income does not exceed certain limits can deposit up to a certain amount annually, with taxes deferred
on the principal and interest. To attract depositors, banks have been advertising the amount that would
accumulate by retirement. Suppose a 40-year-old person deposits $2000 per year until age 65. Find the
total in the account with the interest rates stated in Exercises 37–40. Assume semiannual compounding
with payments of $1000 made at the end of each semiannual period.
37. 6%

41. Sinking Fund A firm must pay off $40,000 worth of bonds in 7 years. Find the amount of each
annual payment to be made into a sinking fund, if the money earns 6% compounded annually.

43. Sinking Fund Pam Snow sells some land in Nevada. She will be paid a lump sum of $60,000 in
7 years. Until then, the buyer pays 8% interest, compounded quarterly.
a. Find the amount of each quarterly interest payment.
b. The buyer sets up a sinking fund so that enough money will be present to pay off the $60,000. The
buyer wants to make semiannual payments into the sinking fund; the account pays 6% compounded
semiannually. Find the amount of each payment into the fund.

45. Present Value of an Annuity In his will the late Mr. Hudspeth said that each child in his family
could have an annuity of $2000 at the end of each year for 9 years, or the equivalent present value. If
money can be deposited at 8% compounded annually, what is the present value?

47. Car Payments Veronica Vergoth buys a new car costing $22,000. She agrees to make payments
at the end of each month for 4 years. If she pays 9% interest, compounded monthly, what is the amount
of each payment? Find the total amount of interest Veronica will pay.