Homework Help: Which annuity formula to use?

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1. Nov 27, 2005

gillgill

A father opened a savings account for his daughter on the day she was born, depositing $1000. Each year on her birthday he deposits another$1000, making the last deposit on her twenty-first birthday. If the account pays 9.5% interest compounded annually, how much is in the account at the end of the day on the daughter's twenty first birthday?

For this question, which formula do i use?
ordinary annuity: where payments are made at end of time period
or
annuities due: where payments are made at beginning of time period
???

2. Nov 27, 2005

Tide

You use the simple equation for compound interest and apply it to each deposit made over the course of 21 years --- and then add them all up. :)

3. Nov 27, 2005

gillgill

but this section is about annuity...ordinary annuity and annuities due are the two equations. Out of these two, which one should i use?

4. Nov 27, 2005

Tide

Tell us how your textbook defines those terms! :)

5. Nov 28, 2005

gillgill

ordinary annuities: those with payments made at the end of each time period.

annuities due: annuities in which payments are made at the beginning of each time period.

6. Nov 28, 2005

Tide

Good. And the father is making payments at the beginning of each compounding period ... therefore ...? :)

7. Nov 28, 2005

HallsofIvy

8. Nov 28, 2005

gillgill

okay...so i use the annuity due formula....
thx.