Annuities Math Example 2

Solution

1. 1
   Use the future value annuity formula solved for $P$: $P = FV \cdot \frac{r}{(1+r)^n - 1}$.
2. 2
   Monthly rate: $r = \frac{0.048}{12} = 0.004$. Number of payments: $n = 120$.
3. 3
   $(1.004)^{120} = e^{120 \ln(1.004)} = e^{120 \times 0.003992} = e^{0.4790} \approx 1.6148$.
4. 4
   P = 50000 \cdot \frac{0.004}{1.6148 - 1} = 50000 \cdot \frac{0.004}{0.6148} = 50000 \cdot 0.006507 \approx \325.34$.