An annuity pays $1200 a year for 15 years. The money is invested at 5.2% compounded annually. The first payment is made 1 year after the purchase of the annuity. Determine the interest earned by the annuity over the 15 years.

Right. So the way I interpret this question is:

V = the future value of the investment
P = the principal investment amount
r = the annual interest rate
n = the number of times that interest is compounded per year
t = the number of years the money is invested for

So we have our V value as the value we're calculating.
P is the initial amount (1200)
R is the annual interest rate, represented as a DECIMAL (0.052) (Remember to get percentage to decimal divide by 100. 5.2/100 = 0.052)
N is the number of times it's compounded per year
And t is the number of years its invested for (15)

So putting that in, that gives me

1200(1+(0.052/1)^(1*15))

For easy calculating, the division by 1 in (0.052/1) and the multiplication by 1 in (1*15) is pointless, so I'll remove it.
1200*(1+0.052)^15
1200*(1.052)^15
1200*(2.139)

Which gives me $2566.95

Subtracting the initial amount (1200) is 1366.95.

Does this make sense. I'm stumbling because I am not sure 1200 is the initial amount put in, because it says "an annuity pays $1200 a year for 15 years."
What do?

An annuity is where you put money in each year
so there will be 15 payments of $1200

future value = c * ((1+i)^n-1)/i)

so id find the future value and minus the deposits to find your interest

edit: didnt see the last bit about payment... if the first payment is 1 year later then you will have 1 less payment/interest period

This post was edited by Branket on Jun 17 2014 02:41am