How to do Model an annuity question? Using a recurrence relation to model an ann

Question

How to do Model an annuity question?

Using a recurrence relation to model an annuity 3 Helen invests $40 000 in an annuity paying interest at the rate of 6% per annum, compounding quarterly. She receives a payment of $10 380 each quarter for 1 year. Let V, be the balance of the loan after n payments have been received. a Model this loan using a recurrence relation of the form: Vo = the principal, Vn+l = RV-D b Use the recurrence relation to determine the balance of the annuity after 6 months. Give your answer to the nearest cent.

Explanation / Answer

A / 1 B C D 2 Investment 40000 3 Term 1 Year 4 Interest 6% 5 Compounding 4 Qtly 6 Qtly payments received $10,380 7 a) after 1 year ($9.04) =FV(C4/C5,C5,C6,-C2,0) 8 That is there is an excess payment received by quarterly payments by $9.04 9 b) Balance after 6 months $20,293.30 =FV(C4/C5,C10,C6,-C2,0) 10 after 6 months means                     2 Qtrs 11 12

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