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annuityannuity(number1, number2)
where number1 represents the interest rate (expressed as a decimal) and number2 represents the number of periods over which you receive annuity payments. Value returned: the total cost of an annuity now that will pay you one unit per period over the specified number of periods, or a number equal to (1 - (1 + rate) ^ -periods) / rate An interest rate involves a certain percentage (expressed as a decimal) per some unit of time—usually per year. You must use the same unit of time to measure the number of periods. For example, if you have a yearly percentage rate but your annuity pays you monthly, use rate / 12, and be sure to express the number of periods as months (2 years = 24 months). ExamplesUse annuity to compute values as follows: amountLoaned = onePayment * annuity(rate,periods) or onePayment = amountLoaned / (annuity(rate,periods)) Example 1: You want to purchase an annuity that pays you $10,000 a year for 10 years. The interest rate on the annuity is 10%. How much will it cost you now? amountLoaned = 10000 * annuity(.10,10) = 61445.67 Note that the annuity costs you $61,445.67, but over 10 years you actually receive $100,000. The difference, $38,554.33, is the interest you earned. Example 2: You borrow $10,000 over 3 years at 10% interest with monthly payments. How much is each monthly payment? onePayment = 10000 / (annuity(.10/12,3*12)) = 322.67 per month
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