       CALCULATING ANNUITY AND PERPETUITY LESSON PLAN TEACHING MONEY CONCEPT LEARNING FINANCE ECONOMIC PRINCIPLES BUSINESS MATH ACTIVITY SAMPLE EXAMPLE HELP STUDENTS PRACTICE TEACHER FINANCE SKILLS DEFINITION FORMULA ONLINE COURSE  Students learn how to calculate annuities and perpetuities. # ANNUITIES AND PERPETUITIES

Concept:  Understand the concept of annuities and perpetuities.

An annuity is simply a series of equal payments or receipts made on a regular basis over a period of time. These can be payments or investments each year, each quarter, or each month. We are surrounded by annuities in our daily lives. For instance, the monthly mortgage payments on our house, quarterly payments to our child’s college trust fund, and periodic loan payments are all examples of annuities.

Objectives:

• Understand and define the concept of Annuities
• Understand and define the concept of Perpetuities
• Discuss the use of the future value (FV) formula
• Know how to calculate returns on Annuities and Perpetuities
• Learn how to value Annuities and Perpetuities             CALCULATING ANNUITIES LESSON PLAN

Teaching Materials

• Lesson - Annuities and Perpetuities  (see below for printable lesson)

• Many pre-calculated interest examples

Lesson Activity

1. Ask class, “What are Annuities?”
• Ask for examples they have – loans or investment
• Provide definition and expand on the examples provided
2. Ask class, “What are Perpetuities?”
• Discuss examples
• Discuss what they are used for
3. Discuss the difference between Annuities and Perpetuities
4. Introduce concept of Future Value
• Work through examples
• Discuss FV as it relates to Annuities
5. Work through annuity calculations
• use lots of examples
6. Introduce % return on any investment
• work through examples
• calculate % return for previous examples used
7. Discuss converting the FV of annuities into today’s dollars (Finding the PV)
• Ask class why this is important
• discuss why this is important for making investment decisions
8. Present PV of an annuity calculations
• Calculate PV for previous examples
9. Talk about Future Value Interest Factor For Annuities and Present Value Interest Factor For Annuities tables
• Discuss what these figures relate to in terms of the formulas
• Distribute copies of tables
• Use examples to show how the tables work
• Work through a few examples using the tables

Assessment/Evaluation
Have students complete worksheet. A passing grade is 70% or greater. Print out the teaching lesson pages and exercise worksheets for use with this lesson:

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