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BA II Plus - Ordinary Annuity Calculations (PV, PMT, FV) - YouTube
Channel: Joshua Emmanuel
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Welcome to the ordinary annuity
calculations tutorial
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using the BA II Plus calculator. I'm
Joshua Emmanuel
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Ordinary annuity simply implies
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set payments are made at the end
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of the payment interval. Like at the end
of the month, or at the end of the year
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or at the end of the quarter. Let's look at
a few examples
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Example 1: Find the future value
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of four hundred dollar payments made
at the
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end of every month for five years
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if interest is 3.2 percent compounded
monthly.
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In this example payments are made
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at the end of every month and interest
is also compounded
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monthly payment interval and compounding
frequency
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coincide so we refer to that as simple
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annuity. We start by pressing
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2ND P/Y. P/Y basically stands for
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payments per year. Since payments are made every month
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there would be 12 payments per year
so we enter 12
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ENTER, scroll down
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It is also a compounded monthly so we enter 12
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ENTER and then
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we can quit that mode. Next we enter
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the time value of money values and then
compute
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future value. So for N we have five
years
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and payments are made at the end of
every month so total number of payments
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will be
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5 times 12
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which is sixty
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payments in total so we press N
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interest rate is 3.2; we press 3.2
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I/Y and present value
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we don't have present value we just have
month end payments so
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we'll do zero present value, and for the
payments
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we enter them as 400
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make them negative because money's
going out
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and then press PMT and we compute
future value.
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so the future value is 25,989.15
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$25,989.15. Let's look at
another example.
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Example 2
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What is the present value of payments of
250 dollars
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made at the end of every quarter for
twelve point five years
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at 7.5 percent compounded semiannually
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so in this case we see that payments are
made quarterly
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but interest rate is compounded
semi-annually
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Payment interval and compounding
frequencies
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are different so we call this general
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annuity. So again to begin we need to
set
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our P/Y. 2ND P/Y
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so payments are made at the end of every
quarter.
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Quarterly payment require that we set
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P/Y to 4 so press 4
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ENTER, we scroll down
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and this is compounded semiannually
which means twice a year
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so we set C/Y to 2 ENTER
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and then we quit that mode. 2ND
QUIT
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Next we enter N. In this case we have
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quarterly payments made for 12 and half
years
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so we have 12 point
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5 times four
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So that is 50 payments all together
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now we press N interest rate is 7.5
percent 7.5
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I/Y. We want to compute the present value
so we don't have that. We skip that for
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now
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payment is 250 so we enter that
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as 250 negative payment
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Since there's no future value, we set future value to zero
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0 future value, and then we compute
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present value so the present value
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$8,096.11
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Thanks for watching
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