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General Mathematics
Second Quarter
Module 4a: Simple Annuity

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 Republic of the Philippines
Department of Education
REGION VII-CENTRAL VISAYAS
SCHOOLS DIVISION OF SIQUIJOR
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 11
Mathematics
Second Quarter
Module 4a: Simple Annuity

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 Introduction

This module is written in support of the K to 12 Basic Education

Program to ensure attainment of standards expected of you as a learner.
This aims to equip you with essential knowledge on the Simple
Annuity.
This includes the following activities/tasks:

 Expected Learning Outcome – this lays out the learning outcome that
you are expected to have accomplished at the end of the module.
 Pre-test – this determines your prior learning on the particular lesson
you are about to take.
 Discussion of the Lesson – this provides you with the application of
the knowledge, principles and attitude that will help you meet the
expected learning outcome.
 Learning Activities – these provide you with the application of the
knowledge and principles you have gained from the lesson and enable
you to further enhance your skills as you carry out prescribed tasks.
 Post-test – this evaluates your overall understanding about the
module.
With the different activities provided in this module, may you find this
material engaging and challenging as it develops your critical thinking
skills.

What I Need to Know

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At the end of this lesson, you will be able to:
 find the future value and present value of simple annuity.

What I Know

I. Multiple Choice. Read and understand each item carefully. Write your
answer in your assessment notebook.

For numbers 1-4, refer to the given problem below.

Find the present value and the amount (future value) of an ordinary annuity
of ₱5,000 payable semi-annually for 10 years if money is worth 6%
compounded semi-annually.
1. What is the value of the interest rate per period (j)
a. 0.005 c. 0.06
b. 0.03 d. 0.3
2. What is the value of the number of payments (n)?
a. 2 c. 20
b. 10 d. 200
3. What is the Future Value (F)?
a. ₱134,351.87 c. ₱74, 387.37
b. ₱143, 351.80 d. ₱79,452.89
4. What is the Present Value (P)?
a. ₱134,351.87 c. ₱74, 387.37
b. ₱143, 351.80 d. ₱79,452.89

For number 5-8, refer to the problem below.

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The buyer of a house and lot pays P200,000 cash and P10,000 every month
for 20 years. If money is 9% compounded monthly, how much is the cash
value of the lot?
5. What is the value of the interest rate per period (j)?
a. 0.09 c. 0.0075
b. 12 d. 0.075
6. What is the value of the number of payments (n)?
a. 12 c. 20
b. 240 d. 200
7. What is the value of Regular payment?
a. ₱200,000 c. ₱1,111,449.54
b. ₱10,000 d. ₱1,311,449.54
8. How much is the cash value of the lot?
a. ₱200,000 c. ₱1,111,449.54
b. ₱10,000 d. ₱1,311,449.54
II. Read and analyze the problem carefully. Write your answers with solution
on your assessment notebook. (4pts.)
A smartphone is purchased with a down payments of ₱1,000 and the
balance at ₱1,075.83 a month for 1 year. What is its cash price if the
interest rate is 6% converted monthly?
Rubric for Problem Solving
Scor Descriptors
e
4 Used an appropriate strategy to come up with the correct
solution and arrived at a correct answer.
3 Used an appropriate strategy to come up with a solution, but a
part of the solution led to an incorrect answer.
2 Used an appropriate strategy but came up with an entirely wrong
solution that led to an incorrect answer.
1 Attempted to solve the problem but used an inappropriate
strategy that led to a wrong solution.

What`s In
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 In this activity you will recall on how to compute maturity value,
interest, and present value when compound interest is computed more than
once a year.

Solve the following problems. Write your answer in your answer sheet.
1. Find the maturity value and interest if ₱14,000 is deposited in a bank
at 2% compounded semi-annually for 7 years.
2. Maris borrows ₱35,000 and promises to pay the principal and interest
at 10% compounded monthly. How much must he repay after 4
years?
3. What is the present value of ₱20,000 due in 2 years and 6 months if
money is worth 8% compounded quarterly?

What`s New

Can you give an examples where people pay by instalment?

Read and understand carefully the given selection. Then try to answer
the questions that follow.
A television (TV) set is for sale at ₱13,499 in cash or on instalment
terms, ₱2,500 each month for the next 6 months at 9% compounded
monthly. If you were the buyer, what would you prefer, cash or instalment?
Questions:
1. What kind of annuity is the given selection?
2. What makes the selection simple annuity?
Example of simple annuity – Instalment payment for an appliance at the end
of each month with interest compounded monthly.

What Is It

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 This is the formula for finding the amount (future value) F of an
ordinary annuity is derived.

(1+ j)n−1
F=R
j
Illustrate the cash flow in a time diagram.

F
R R … R R
0 1 2 … n-1 n

R
R(1+j)

R(1+j)n-2
R(1+j)n-1

F = R + R(1+ j) + R(1 + j)2 + ∙ ∙∙ + R(1 + j)n-2 + R(1 + j)n-1 (1.1)

Multiply both sides by 1 + j to get
F(1 + j) = R(1 + j) + R(1 + j)2 + R(1 + j)3 + ∙ ∙∙+¿R(1 + j)n-1 + R(1 + j)n (1.2)
From equation (1.2), subtract (1.1) to produce
F(1 + j) – F = R(1 + j)n – R

F [ ( 1+ j ) −1 ]=R [(1+ j)n −1 ]

F(j) = R [(1+ j)n −1 ]

(1+ j)n−1
F=R
j

Example 1
Suppose Mrs. Remoto would like to save ₱3,000 every month in a
fund that gives 9% compounded monthly. How much is the amount or
future value of her savings after 6 months?

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 Given:
R = ₱3,000 t = 6 months
9
interest rate per annum i12 = = 0.09
12
number of conversion per year m = 12
0.09
interest rate per period j = = 0.0075
12

(1+ j)n−1
F=R
j

(1+0.0075)6−1
F = 3,000
0.0075

= 3,000( 1.0458522351−1
0.0075 )
.0458522351
= 3,000(
0.0075 )

= 3,000(6.11363134667)
F = ₱18,340.89
The formula for F was derived based on the
procedure on how to accumulate the payment
of each period to the end of the term.

Amount (Future Value) of ordinary annuity:

The future value F of an ordinary annuity is
given by

(1+ J )n−1
F=R
j
Where R is the regular payment;
j is the interest rate per period;
n is the number of payments

Example 2

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 (Recall the problem in Example 1.) Suppose Mrs. Remoto would like to
know the present value of her monthly deposit of ₱3,000 when interest is 9%
compounded monthly. How much is the present value of her savings at the
end of 6 months?
Given: periodic payment R = 3,000
term t = 6 months
interest rate per annum i(12) = 0.09
number of conversions per year m = 12
0.09
interest rate per period j = = 0.0075
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Find : Present value P
Step 1. Discount the payment of each period to the beginning of the
term. That is, find the present value of each payment. Recall the
formula:

Step 2. Add the discounted payments to get the present value.

3,000(1.0075)-1 = 2977.667
3000(1.0075)-2 = 2955.501
3000(1.0075)-3 = 2933.50
3000(1.0075)-4 = 2911.663
3000(1.0075)-5 = 2889.988
3000(1.0075)-6 = 2868.474
P = ₱17,536.79

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 The derivation of the formula in finding the present value P of an
annuity immediate in similar to the solution of Example 2.
Discount or get the value of each payment at the beginning of the
term and then add to get the present value of an ordinary annuity.
Use the formula.
F
P= n = F(1 + j)
-n
(1+ j)

From Equation (1.3) subtract Equation (1.4) to produce

1 R R
P−P = −
1+ j 1+ j (1+ j)n

1 R 1
(
P 1− )=
1+ j 1+ j (
1−
(1+ j)n )
( 1+1+j−1j )= 1+R j (1-(1+j) )
¿P -n

j R
P( ) = (1-(1+j) )-n
1+ j 1+ j

Pj = R(1-(1+j)-n)

1−( 1+ j )−n
P=R
j

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Alternative Derivation
The future value of an ordinary annuity was given earlier by

( 1+ j )n−1
F=R
j

F
To get the present value of this amount, we use the formula and
( 1+ j )n
obtain

(1+ j)n−1
R
F j (1+ j)n −1 −n 1−(1+ j)−n
P= n
= n
=R (1+ j) =R
(1+ j) (1+ j) j j

Present Value of an Ordinary Annuity (Annuity-Immediate)

R R R R R … R
0 1 2 3 4 5 … n
The present value of an annuity-immediate is given by:

1−(1+ j)−n
P= R
j
Where R is the regular payment,
j is the interest rate per period,
n is the number of payments

Solve Example 2 using the derived formula for P.

1−(1+ j)−n
P =R
j

1−(1+ 0.0075)−6
= 3,000
0.0075

= 3,000 ( 0.04384198223
0.0075 )
= 3,000(5.84559763067)
= ₱17,536.79

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The Concept of Cash Value or Cash Price.
Definition.
The cash value or cash price is equal to the down payment (if
there is any) plus the present value of the instalment payments.

Example 3
Mr. Ribaya paid ₱200,000 as down payment for a car. The remaining
amount is to be settled by paying ₱16,200 at the end of each month for 5
years. If interest is 10.5% compounded monthly, what is the cash price of
his car?
Given:
down payment = 200,000
R = 16,200 m = 12 t = 5 years
0.105
i(12) = 0.105 j= = 0.00875 n = mt = (12)(5) = 60
12
periods
Find the cash value or cash price of the car.

1−(1+ j)−n
P=R
j

1−(1+ 0.00875)−60
P=(16200)
0.00875

=16200 ( 0.40709223761
0.00875 )
=16200(46.5248271554)
P = 753,702.20
Cash value = Down payment + present value
= 200,000 + 753,702.20
= ₱953,702.20

The cash price of the car is ₱953,702.20

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Example 4
In order to save for her high school graduation, Marie decided to save
₱200 at the end of each month. If the bank pays 0.25% compounded
monthly, how much will her money be at the end of 6 years?
Given: R = 200
m = 12
.25
i(12) = 0.250% = 0.25
100
0.25
j= = 0.0002083́
12
t = 6 years
n = tm = (6)(12)= 72 periods

Find F.

Solution.

(1+ j)n−1
F=R
j
(1+0.000208 3́)72−1
F = 200
0.000208 3́
(1.000208 33333)72−1
F = 200 [ 0.000208 33333 ]
1.01511147848−1
= 200 ( 0.000208 33333 )
.01511147848
= 200 (0.000208 33333 )
= 200(72.5350978646)
F = ₱14,507.02

Hence, Marie will be able to save ₱14,507.02 for her graduation

Example 5
Paolo borrowed ₱100,000. He agrees to pay the principal plus interest
by paying an equal amount of money each year for 3 years. What should be
his annual payment if interest is 8% compounded annually?
Given: P = ₱100 000

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 i(1) = 0.08
m=1
j = 0.08
t = 3 years
n = mt = (1)(3) = 3 periods

Find periodic payment R.

1−(1+ j)−n
Since P=R then
j

1−(1+ j)−n
R = P/ [ j ]
−3
1−(1+0.08)
R = 100,000/ [ 0.08 ]
0.20616775898
= 100,000/
0.08
= 100,000/2.57709698725)
R = ₱38,803.35
Thus, the man should pay ₱38,803.35 every year for 3 years.

What’s More

Directions: Read and understand each problem carefully. Write you answer
and solutions in your assessment notebook. Final answer
should be in a hundredths place.

1. Peter started to deposit ₱5,000 quarterly in a fund that pays 1%

compounded quarterly. How much will be in the fund after 6 years?
2. The buyer of a lot pays ₱50,000 cash and ₱10,000 every month for 10
years. If money is 8% compounded monthly, how much is the cash
value of a lot?

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What I Have Learned

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I have learned that:

Periodic payment R of an Annuity:

Periodic payment R can also be solved using the formula for

amount F or present value P of an annuity.

(1+ j)n −1 (1+ j)n−1

F=R ( j ) R=F / (
j )
F=R ¿ (1+ j)n−1
R=F /
where R is the regular payment;
( j )
P is the present value of an annuity
F is the future value of an annuity
j is the interest rate per period;
n is the number of payments

Amount (Future Value) of ordinary annuity:

The future value F of an ordinary annuity is given by

(1+ J )n−1
F=R
j
where R is the regular payment;
j is the interest rate per period;
n is the number of payments

Present Value of an Ordinary Annuity (Annuity-Immediate)

R R R R R … R
0 1 2 3 4 5 … n

The present value of an annuity-immediate is given by:

1−(1+ j)−n
P=R
j
where R is the regular payment,
j is the interest rate per period,
n is the number of payments

What I Can Do

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Directions: Solve the following problems completely. Write your final
answers (in a hundredths place) with solutions on your
assessment notebook.

Find the present value P and amount of F of the following ordinary

annuities.

1. Quarterly payment of ₱2,000 for 5 years with interest rate of 8%

compounded quarterly.
2. Semi-annually payments of ₱8,000 for 12 years with interest rate of
12% compounded semi-annually.

Assessment

I. Multiple Choice. Read and understand each item carefully. Choose the
letter of the correct answer and write your answer in your assessment
notebook.
For numbers 1 – 4, refer to the given problem below.
Grace borrowed ₱150,000 payable in 2 years. To repay the loan, she
must pay an amount every month with an interest rate of 6% compounded
monthly. How much should she pay every month?

1. What is the value of n or the number of payments?

a. 2 c. 24
b. 12 d. 6

2. Which of the following is the value of j or the interest rate per period?
a. 12 c. 0.5
b. 0.06 d. 0.05

3. Which of the following is the value of m number of conversion per

year?
a. 12 c. 0.5
b. 2 d. 0.05

4. How much should Grace pay every month?

a. ₱6, 648.09 c. ₱4, 668.10
b. ₱150,000 d. ₱8,466.09

For numbers 5 - 8,refer to the problem below.

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 To pay for his debt at 12% compounded quarterly, Ruben committed
for 8 quarterly payments of ₱28,491.28 each. How much did he borrow?
5. What is the regular payment?
a. ₱200,000 c. ₱28,491.28
b. ₱250,095 d. 155,045

6. Which of the following is the value of j or the interest rate per period?
a. 0.12 c. 12
b. 0.03 d. 0.10

7. What is the value of n or the number of payments?

a. 4 c. 2
b. 8 d. 12

8. How much did Ruben borrow ?

a. ₱200,000 c. ₱28,491.28
b. ₱250,095 d. 155,045

For numbers 9 - 12, refer to the problem below.

The buyer of a car pays ₱169,000 cash and ₱12,000 every month for 5
years. If money is 10% compounded monthly, how much is the cash price of
the car?
9. What is the value of j or the interest rate per period?
a. 0.10 c. 0.0083́
b. 0.25 d. 12

10. Which of the following is the value of n or the number of

payments?
a. 12 c. 2
b. 5 d. 60

11. How much is the value of R?

a. ₱169,000 c. ₱733,784.43
b. ₱12,000 d. ₱564,784.43

12. How much is the cash price of the car?

a. ₱169,000 c. ₱733,784.43
b. ₱12,000 d. ₱564,784.43

II. Solve the following problem. Write your answers and solutions in
assessment notebook. Final answer should be in hundredths place.

1. A high school student would like to save ₱50,000 for his graduation.
How much should he deposit in a savings account every month for 5.5
years if interest is at 0.25% compounded monthly?

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 Rubric for Problem Solving
Scor Descriptors
e
4 Used an appropriate strategy to come up with the correct
solution and arrived at a correct answer.
3 Used an appropriate strategy to come up with a solution, but a
part of the solution led to an incorrect answer.
2 Used an appropriate strategy but came up with an entirely
wrong solution that led to an incorrect answer.
1 Attempted to solve the problem but used an inappropriate
strategy that led to a wrong solution.

Answer Key

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What I Know
I. II.
1. d 7. a 1. CP = ₱13,499.99
2. c 8. c
3. b 9. c
4. c 10. b
5. b 11. b
6. c 12. d

What’s In
Possible answers: Insurance payments, major purchases (e.g., appliances,
property) or loan payments by instalment are done periodically, and in equal
amounts. This payment scheme is called annuity.

What’s More Assessment

Independent Assessment 1: I.
1. F = ₱123,514.09 1. c 7. b
Independent Assessment 2: 2. d 8.a
1. CV= ₱874, 214.81 3. a 9. c
What Can I do 4. a 10. d
1. F = ₱48,594.74 5. c 11. b
P = ₱32,702.87 6. b 12. c
2. F = ₱406,524.60
P = ₱100,402.90 II.
1. ₱752.46

References

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https://www.slideshare.net/FloydSaunders/annuity-basics-13663449?
next_slideshow=1

Verzosa, Debbie Marie, Leo Andrei Crisologo, Lester Hao, Eden Delight Miro,
Shirlee Ocampo, Emillie Palomo and Regina Tresvalles, Teaching
Guide for Senior High School General Mathematics Core Subject.
Quezon City: Commission on Higher Education, 2016.

Verzosa, Debbie Marie, Paolo Luis Apolinario, Regina Tresvalles, Francis

Nelson Infante, Jose Lorenzo Sin and Len Patrick Dominic Garces,
General Mathematics Learner’s Material.1st ed. Pasig City: Lexicon
Press,2016.

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