Question 1
Simone makes regular monthly deposits of $650 into an investment account earning 4.5% p.a. compounding monthly for 8 years. Calculate the total interest earned over the investment period.
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General Mathematics · Unit 4 · Loans, investments and annuities 2 · Perpetuities and future value of ordinary annuities
Solve practical problems involving the future value of an ordinary annuity, including determining the total amount of the annuity, periodic payment, total payments and total interest.
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Question 2
Maya opens a savings account and deposits $450 at the end of each quarter for 5 years. The account earns interest at a rate of 6% per annum, compounded quarterly. Calculate: (a) the future value of the annuity, correct to the nearest cent; [1] (b) the total amount Maya contributes; [1] (c) the total interest earned. [1]
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More in Perpetuities and future value of ordinary annuities
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Solve practical problems involving perpetuities, including determining the total amount of the perpetuity, periodic payment and interest rate per compounding period. General Mathematics 2025 v1.3
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Use a recurrence relation to model the future value of an ordinary annuity, e.g. compound interest investment with periodic payments where interest is calculated before the periodic payment is made. 𝐴𝑛+1 = 𝑟𝐴𝑛 + 𝑑 where 𝐴𝑛+1 is total amount at the beginning of the (𝑛 + 1)th period, 𝐴𝑛 is total amount at the beginning of the 𝑛th period, 𝑑 is periodic payment and 𝑟 = 1 + 𝑖 where 𝑖 is interest rate per compounding period