Consumer Loansand

Annuities

Jenna buys a bedroom set at Fowler’s Furniture for $3,700. She puts $500 down and finances the rest through the store at 9.8% add-on interest. If she agrees to make 36 monthly payments, find the size of each payment.

The activity on Sophie Jones’s Sears account for one billing period is shown below. Find the average daily balance and the finance charge if the billing period is March 1 through March 31. The previous balance was $157.14, and the annual interest rate is 21%.

March 5 payment $25.00March 17 tools $36.12

Formulas

A R1 r

m

mt

1

rm

Ordinary Annuity Formula

John Smith recently set up a tax-deferred annuity to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn

annual interest. He just had his thirtieth birthday, and his ordinary annuity comes to term when he is sixty-five. Find the following:

• the future value of the account

• John’s total contribution to the account.

• the total interest

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