Practice Annuities in Math

Use these practice problems to test your method after reviewing the concept explanation and worked examples.

Quick Recap

A series of equal payments made at regular intervals over a fixed period of time. The future value and present value formulas calculate the total worth of these payment streams.

Imagine depositing \$100 every month into a savings account. Each deposit earns interest for a different amount of time—the first deposit earns interest for the full term, the last deposit barely earns any. An annuity formula adds up all these differently-growing deposits in one clean expression, instead of computing compound interest on each payment separately.

Example 1

easy
You deposit \200 at the end of each month into an account earning 6\% annual interest compounded monthly. How much will you have after 1$ year?

Example 2

medium
What monthly payment is needed to accumulate \50{,}000 in 10 years if the account earns 4.8\%$ annual interest compounded monthly?

Example 3

medium
You want to receive \1{,}000 per month for 20 years from a retirement account earning 5\%$ annual interest compounded monthly. How much must be in the account at the start of retirement?

Example 4

hard
Compare an ordinary annuity and an annuity due, both with \500 monthly payments at 6\% annual interest compounded monthly for 5$ years. How much more does the annuity due accumulate?
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