With an annuity due<\/strong>, the payment is received at the beginning of the month.<\/p>\n Using, once again, the TI-83 Plus TVM solver, we’ll rework yesterday’s example as if it is an annuity due; i.e., each payment comes at month’s beginning:<\/p>\n Recall that the annuity was purchased for $185 000, offered interest of 4.5% (compounded monthly), and was to be paid monthly over 15 years. We’ll set up the TI-83 Plus TVM solver (see my post here<\/a> for how to use it) with the following parameters:<\/p>\n N=15×12 The PMT entry on the fourth line we leave blank at first; for the one at the bottom, we choose BEGIN.<\/p>\n After all the parameters are entered, we return to the PMT on the fourth line and key in ALPHA<\/span> ENTER. Hopefully, the value 1409.95<\/span> appears.<\/p>\n Notice that, when this was an ordinary annuity (once again, see yesterday’s post<\/a>), the payment was $1415.24.<\/p>\n There is still more to say about annuities, and of course how to find their payments on other makes of financial calculator. I’ll be offering more coverage in future posts:)<\/p>\n Source:<\/p>\n Tan, S.T. Applied Finite Mathematics<\/em>. Boston: PWS-KENT Publishing Company, 1990.<\/p>\n
\nIn my previous post<\/a> I introduced the idea of an annuity with an example. That example had each payment at month’s-end; hence, it was an ordinary annuity<\/strong>.<\/p>\n
\nI%=4.5
\nPV=-185000 (negative because it’s being paid out)
\nPMT:leave this one blank for now<\/em>
\nFV=0 (at the end of the 15 years, there’s nothing left)
\nP\/Y=12 (12 payments per year)
\nC\/Y=12 (monthly compounding periods)
\nPMT:BEGIN (Payment at beginning of month: annuity due)<\/p>\n