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Annuity

This document discusses annuities, including simple and general annuities, ordinary and annuity due, annuity certain and annuity uncertain. It provides formulas for computing the future value and present value of simple ordinary annuities. Examples are provided for calculating future values, present values, amounts borrowed, interest paid, and deposits needed based on regular payments into annuity accounts with different interest rates and time periods.

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Jc Agdon
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49 views34 pages

Annuity

This document discusses annuities, including simple and general annuities, ordinary and annuity due, annuity certain and annuity uncertain. It provides formulas for computing the future value and present value of simple ordinary annuities. Examples are provided for calculating future values, present values, amounts borrowed, interest paid, and deposits needed based on regular payments into annuity accounts with different interest rates and time periods.

Uploaded by

Jc Agdon
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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LESSON 6: GENERAL MATHEMATICS

ANNUITY
ANNUITY
SIMPLE ORDINARY

FUTURE VALUE

PRESENT VALUE
LESSON 5
What is an
annuity?
annuity
It refers to the fixed sum of money
paid to someone at regular
intervals, subject to a fixed number
of compound interest rate.
Types of
annuities
According to payment interval and
interest period
Simple annuity
It is an annuity where the
payment interval coincides
with the interest conversion
period.
general annuity
It is an annuity where the
payment interval does not
coincide with the interest
conversion period.
Simple or general annuity?

Example 1:

Payments are made at the end of


each month for a loan that
charges 1.05% interest
compounded quarterly.
Simple or general annuity?

Example 1:

Payments are made at the end of


each month for a loan that
charges 1.05% interest
compounded quarterly.
Answer:
General Annuity
Simple or general annuity?

Example 2:

A deposit of Php 10,500 was made


at the end of every three months
to an account that earns 5.6%
interest compounded quarterly.
Simple or general annuity?

Example 2:

A deposit of Php 10,500 was made


at the end of every three months
to an account that earns 5.6%
interest compounded quarterly.
Answer:
Simple Annuity
According to the time of
payment
Ordinary annuity

It is an annuity in which
payments are made at the
end of each payment
interval.
Annuity due

It is an annuity in which
payments are made at the
beginning of each payment
interval.
According to the duration of
annuity
Annuity certain

It is an annuity with a
definite beginning and
ending dates.
Annuity uncertain

It is an annuity with no
definite beginning and
ending dates.
How do we compute
FOR annuities?
Future value
The future value of an annuity is the total
accumulation of the payments and
interest earned.
Present value
The present value of annuity is the
principal that must be invested today to
provide the regular payments of an
annuity.
simple ordinary annuity
Simple ordinary annuity
To compute the future value of simple ordinary
annuity, use the formula –
Simple ordinary annuity
To compute the present value of simple ordinary
annuity, use the formula –
COME ON,
LET’S SOLVE!
SIMPLE ORDINARY
ANNUITY
Example 1:

Hope borrows money to buy motorcycle.


He will repay the loan by making monthly
payments of Php1,500 per month for the
next 24 months at the interest rate of 9%
per year compounded monthly. How
much did Fernan borrow? How much
interest does Fernan pay?
Solution:
SIMPLE ORDINARY
ANNUITY
Example 2:

Aaron’s mother saved Php5,000 at


the end of every 6 months in an
education plan that earns 6% per
year compounded semi-annually.
What is amount at the end of 18
years?
Solution:
SIMPLE ORDINARY
ANNUITY
Example 3:

If you pay Php50 at the end of each


month for 40 years on account that
pays interest at 10% compounded
monthly, how much money do you
have after 40 years?
Solution:
SIMPLE ORDINARY
ANNUITY
Example 4:
Rose works very hard because she wants
to have enough money in her retirement
account when she reaches the age 60. She
wants to withdraw Php36,000 every 3
months for 20 years starting 3 months
after she retires. How much must Rose
deposit at retirement at 12% per year
compounded quarterly for the annuity?
Solution:
Thank you for
listening!

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