Question

A. Use the appropriate formula to find the value of the annuity b. Find the interest.

Answer 1

Answer:

The value of annuity is $65

The interest is $135

Step-by-step explanation:

The parameters given are:

Value of each payment, P = $1500

Rate, r = 5.25%

Time, t = 7 years

The value of the annuity is:

`\begin{gathered} V=P*(1-(1+r)^(-n))/(r) \\ \\ =1500*(1-(1+0.0525)^(-7))/(7) \\ \\ 1500*(1-(1.0525)^(-7))/(7) \\ \\ =64.5\approx65 \end{gathered}`

The interest is 1500 - 65*3*7 = $135