MTH 120
Finance Worksheet 2
Name
1. Future Value Annuity: How long will it take Dot Snice to accumulate $1,000,000 if she invests $3,000 per year at an annual
interest rate of 8%? Assume interest is compounded annually.
N-\1%-PV-\PMT-\FV-\P/Y-\C/Y-\PMT: END BEGIN
$1000000 = 3000 \left[ \frac{(1 + \frac{.08}{m})^{mt} - 1}{\frac{.08}{m}} \right]
(a) Now complete the two tables below by finding the number of years it would take to accumulate $1,000,000. In the first
table, the annual payment varies. In the second table the interest rate varies.
PMT
t (m = 1; r = .08; FV = 1,000,000)
r
t (m = 1; PMT = 3000; FV = 1,000,000)
600
.01
1200
.05
3000
.08
7200
.09
12000
.13
15000
.20
(b) Does the payment amount have a significant impact on the years to reach $1,000,000? Explain.
(c) Does the annual interest rate have a significant impact on the years to reach $1,000,000? Explain.
