For an ordinary annuity with five annual payments of $100 and a 10 percent interest rate, how many years will the first payment earn interest, and what will this payment’s value be at the end? Answer this same question for the fifth payment.
Assume that you plan to buy a condo five years from now, and you estimate that you can save $2,500 per year. You plan to deposit the money in a bank that pays 4 percent interest, and you will make the first deposit at the end of the year. How much will you have after five years? How would your answer change if the interest rate were increased to 6 percent, or lowered to 3 percent?
