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General Annuity: Future Value Present Value Cash Flow Fair Market Value

This document discusses general annuities, which are annuities where the payment interval is different than the compounding period. It provides examples of calculating the future value of general annuities, including deposits made monthly into a fund with quarterly compounding interest and biannual deposits into an account with monthly compounding interest. Formulas are given for calculating the future value as well as examples worked out.

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Reyes C. Ervin
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822 views7 pages

General Annuity: Future Value Present Value Cash Flow Fair Market Value

This document discusses general annuities, which are annuities where the payment interval is different than the compounding period. It provides examples of calculating the future value of general annuities, including deposits made monthly into a fund with quarterly compounding interest and biannual deposits into an account with monthly compounding interest. Formulas are given for calculating the future value as well as examples worked out.

Uploaded by

Reyes C. Ervin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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GENERAL ANNUITY

FUTURE VALUE

PRESENT VALUE

CASH FLOW

FAIR MARKET VALUE


General Annuity–an annuity where the length of
the payment interval is not the same as the length of
the interest compounding period
General Ordinary Annuity – a general annuity in
which the periodic payment is made at the end of the
payment interval
EXAMPLES OF GENERAL ANNUITY:

• Monthly installment payment of a car, lot, or


house with an interest rate that is compounded
annually.
• Paying a debt semi-annually when the interest is
compounded monthly.
EXAMPLE 1

•Cris started to deposit ₱1,000 monthly


in a fund that pays 6% compounded
quarterly. How much will be in the fund
after 15 years?
FUTURE VALUE OF A GENERAL ORDINARY
ANNUITY
1+𝑗 𝑛
F=R
𝑗

Where R is the regular payment


j is the equivalent interest rate per payment
interval converted from the interest rate per period.
n is the number of payments
EXAMPLE 2

•A teacher saves ₱5000 every 6 months


in a bank that pays 0.25% compounded
monthly. How much will be her savings
after 10 years?
SEATWORK

•ABC Bank pays interest at the rate of 2%


compounded quarterly. How much will Ken
have in the bank at the end of 5 years if he
deposits ₱3,000 every month?

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