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HANDOUT 7.0 - Sample Problem For Deferred Annuity

The document discusses deferred annuities, which are annuities where the first payment is deferred for a certain number of periods. It provides two sample problems that are solved using the formula for finding the present value of a deferred annuity. The first problem involves finding the annual payments needed to pay back a loan with interest over 8 years, with the first payment deferred for 10 years. The second problem calculates the cash price of a property being acquired with a down payment and 10 annual payments starting in 5 years, discounted at 14% interest.

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Eruel Cruz
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3K views2 pages

HANDOUT 7.0 - Sample Problem For Deferred Annuity

The document discusses deferred annuities, which are annuities where the first payment is deferred for a certain number of periods. It provides two sample problems that are solved using the formula for finding the present value of a deferred annuity. The first problem involves finding the annual payments needed to pay back a loan with interest over 8 years, with the first payment deferred for 10 years. The second problem calculates the cash price of a property being acquired with a down payment and 10 annual payments starting in 5 years, discounted at 14% interest.

Uploaded by

Eruel Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1st Semester 2021-22 DEFERRED ANNUITY

Deferred Annuity - it is also Ordinary annuity but the payment of the first amount is
deferred a certain number of periods after the first period.

Sample Problems:

#323 CE Board May 1998


A man loans P187,400.00 from a bank with interest at 5% compounded
annually.. He agrees to pay his obligations by paying 8 equal annual payments,
the first payment being due at the end of 10 years. Find the annual payments.

Solutions:

[ ( 1.05 )8 - 1]
P = A ----------------------
( 1.05 )8 (.05)

P = 6.463 A

6.463 A
P1 = ---------------
( 1.05 )9

187,400 (1.05)9
A = -----------------------
6.463

A = P44,982.04
1st Semester 2021-22 DEFERRED ANNUITY

# 324 ME Board April 1998


A house and lot can be acquired a down payment of P500,000.00 and a yearly
payment of P100,000.00 at the end of each year for a period of 10 years, starting
at the end of 5 years from the date of purchase. If money is worth 14%
compounded annually, what is the cash price of the property?

Solutions:

[ ( 1.14 )10 - 1]
P = 100,000 ----------------------
( 1.14 )10 (0.14)

P = 521,611.56

521,611.56
P1 = --------------------
(1.14)4

P1 = P308,835.00

Cash Price = P500,000 + 308,835.00

= P 808,835.00

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