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Gen Math Q2 Week 5 Deferred Annuity

A deferred annuity is an insurance contract that begins payments after a specified time interval, allowing for tax-deferred earnings during the deferral period. Examples include deferred payments for appliances, credit card purchases, and real estate transactions. The document also discusses calculating the present value of deferred annuities with various examples.

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4 views6 pages

Gen Math Q2 Week 5 Deferred Annuity

A deferred annuity is an insurance contract that begins payments after a specified time interval, allowing for tax-deferred earnings during the deferral period. Examples include deferred payments for appliances, credit card purchases, and real estate transactions. The document also discusses calculating the present value of deferred annuities with various examples.

Uploaded by

rhylljandelumen
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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DEFERRED ANNUITY

Q2 – WEEK 5

Deferred Annuity is an annuity that does not begin


until a given time interval has passed.
It is a kind of annuity whose payments (or
deposits) starts in more than one period from the
present. Likewise, the first payment interval does
not coincide with the first interest period, and it is
DEFERRED put off to some later date.
ANNUITY It may also be considered as an insurance contract
designed for long-term savings. Unlike an
immediate annuity, which starts annual or monthly
payments almost immediately, investors can delay
payments from a deferred annuity indefinitely.
During that time, any earnings in the account are
tax-deferred.
DEFERRED ANNUITY
• Deferred annuities are series of payments, as
they have already learned in the past lessons on
annuities but, will start on a later date.
• Some examples of this type of annuity in real
life.
1. If you will buy appliance, some big stores
or appliances center offers deferred
payment
2. A credit card company is offering its clients
to purchase today but to start paying
monthly with their choice of the term after
3 months.
3. A real estate agent is urging a house and
lot buyer to purchase now and start paying
after 3 years when the housing unit is
ready for occupancy.

Present Value of a Deferred Annuity

In a deferred annuity, the first cash flow is expected to occur


more than one period after the date of the agreement.
• Deferred Annuity – an annuity that does not begin
until a given time interval has passed
• Period of Deferral – time between the purchase of
an annuity and the start of the payments for the
deferred annuity
Definition
of Terms in
Deferred
Annuity

Present Value
of a Deferred
Annuity
Example:

Find the present


value of 10 semi-
annual payments of
₱2,000.00 each if the
first payment is due
at the end of 3 years
and money is worth
8% compounded
semi-annually.

Example:

Find the present value


of a deferred annuity of
₱1,500.00 every 3
months for 8 years that
is deferred 3 years if
money is worth 6%
converted or
compounded quarterly
Example:

A credit card company


offers a deferred payment
option for the purchase of
any appliance. Rose plans
to buy a smart television
set with monthly payments
of P4,000 for 2 years. The
payments will start at the
end of 3 months. How
much is the cash price of
the TV set if the interest
rate is 10% compounded
monthly?

Example:

Melvin availed of a loan


from a bank that gave
him an option to pay
P20,000 monthly for 2
years. The first payment
is due after 4 months.
How much is the
present value of the
loan if the interest rate
is 10% converted
monthly?
Example:

Find the period of


deferral in each of the
following deferral
annuity problem (one
way to find the period
of deferral is to count
the number of artificial
payment (k)

END OF PRESENTATION

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