An Annuity Paying $1400 at the End of Each Month

question 9

Essay

An annuity paying $1400 at the end of each month (except for a smaller final payment) was purchased with $225,000 that had accumulated in an RRSP. The annuity provides a semi-annually compounded rate of return of 5.2%.
a) What amount of principal will be included in Payment 137?
b) What will be the interest portion of Payment 204?
c) How much will the principal be reduced by Payments 145 to 156 inclusive?
d) How much interest will be paid in the twentieth year?
e) What will be the final payment?

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Definitions:

Exchange Theory

A social psychological theory that explains human behavior in terms of the exchanges between individuals and the rewards or costs associated with those interactions.

Equity Theory

A theory in social psychology asserting that individuals are motivated by a sense of fairness in their interactions, focusing on the balance between inputs and outputs in relationships.

Romantic Relationship

A bond between two individuals characterized by emotional and often sexual attraction, commitment, and intimacy.

Mating Preferences

Criteria or choices exerted by individuals in selecting partners for reproduction, which can be influenced by genetic, environmental, and cultural factors.