Mark: Knowledge/Understanding 2 1. What is an annuity? What is an example of an annuity? 2. Complete the following table. $100 deposited at the end of each month at 6% per year compounded monthly a. Month Starting Balance $0 1 Interest Earned Deposit $0 $100 ($100)(0) $100 = $0.50 Ending Balance $100 $100 + $0.05 + $100 = $200.50 2 $100 3 4 b. $1000 deposited at the end of each year at 8 % per year compounded annually. Year 1 Starting Balance Interest Earned Deposit $0 SO $1 000 ($1 000)(0.08) $1 000 $1000 $80.00 Ending Balance $ 1 000 $1000 + $80-$1 000 = $2 080 2 mi 4 TVM Solver N-32 5 3. 1% -3.5 PV = 106783 b. PMT -350 Maeve wants to set up an annuity to help with her college expenses. She uses a TVM solver to explore a possible plan. What regular withdrawal does Maeve plan to make? What is the annual interest rate? How often will she make these withdrawals? What is the total number of payments Maeve will make? How much will Maeve have to deposit to provide for the withdrawals? FV = 0 P/Y=12 C/Y 12