SDO MALABON CITY 11

GENERAL MATHEMATICS

Second Quarter
GENERAL MATHEMATICS SHS SECOND QUARTER

G11 SLEM # 11 – WEEK 4 – 2nd QUARTER

GENERAL ANNUITY – CASH FLOW

OVERVIEW
This module was designed and written with you in mind. It is here to
help you understand calculating the fair market value of a cash flow
stream that includes an annuity. The scope of this module permits it to be
used in many different learning situations. The language used recognizes
the diverse vocabulary level of students. The lessons are arranged to
follow the standard sequence of the course. But the order in which you
read them can be changed to correspond with the textbook you are now
using. The module focuses on achieving this learning competency:

Calculate the fair market of a cash flow stream that includes an

annuity.

After going through this module, you are expected to:

• find the future value and present value of annuity;
• solve the equivalent interest rate; and
• calculate the market value of a cash flow.

PRETEST

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. If the interest rate is 6% compounded quarterly, what is the

present value of P7,700 payable at the end of each 6 months for
8 years?

A. P 87,370.95 C. P 107,170.67
B. P 96,544.33 D. P 136,070.86
GENERAL MATHEMATICS SHS SECOND QUARTER

2. Find the cash equivalent of a sala set with a down payment of P

12,000 and P 1,450 for the balance payable every end of the
month for 30 months with interest rate of 8% compounded
quarterly.

A. P 19,879.17 C. P 17,685.34
B. P 18,789.71 D. P 16,956.21

3. Which of the following is true for any annuity as the term of

compounding becomes longer?

A. The interest increases as periodic payment also increases.

B. The interest decreases as periodic payment also decreases.
C. The interest increases as periodic payment also decreases.
D. The interest decreases as periodic payment also increases

LOOKING BACK
To solve problems about cash flows we will apply the concepts of present
value and future values. Recall the formula:

Present Value Future Value

𝑃 = 𝐹 (1 + 𝑟)−𝑛 𝐹 = 𝑃(1 + 𝑟)𝑛
Compound −𝑚𝑡 𝑚𝑡
Interest 𝑖 (𝑚 ) 𝑖 (𝑚 )
𝑃 = 𝐹 (1 + ) 𝐹 = 𝑃 (1 + )
𝑚 𝑚

1 − (1 + 𝑗)−𝑛 (1 + 𝑗)𝑛 − 1
𝑃 =𝑅[ ] 𝐹 =𝑅[ ]
𝑗 𝑗
Ordinary
Annuity
1 − (1 + 𝑗)−𝑛 (1 + 𝑗)𝑛 − 1
𝑃(𝑔𝑜) = 𝑅(𝑔𝑜) [ ] 𝐹(𝑔𝑜) = 𝑅(𝑔𝑜) [ ]
(1 + 𝑗)𝑘 − 1 (1 + 𝑗)𝑘 − 1
GENERAL MATHEMATICS SHS SECOND QUARTER

BRIEF INTRODUCTION OF THE LESSON

• Cash flow – is a term that refers to payments received (cash flows)

or payments or deposits made (cash outflows).
• Cash inflows – can be represented by positive numbers.
• Cash outflows – can be represented by negative numbers.
• The Fair Market Value or Economic Value - a cash flow (payment
stream) on a particular date refers to a single amount that is
equivalent to the value of the payment stream at that date.

Example: Mr. Dela Cruz received two offers on a lot that he wants
to sell. Mr. Alfonso has offered P50,000 and P1,000,000 lump sum
payment for 5 years from now. Mr. Co has offered P50,000 plus P40,000
every quarter for five years. Compare the fair market values of the two
offers if money can earn 5% compounded annually. Which offer has a
higher market value?

Given:
Mr. Alfonso’s offer Mr. Co’s Offers
P50,000 down payment P50,000 down payment
P1,000,000 after 5 years P40,000 every quarter for 5 years

Find: the fair market values of each offer.

Solution:
Illustrate the cash flows of the two offers using time diagrams. It is
convenient to choose focal dates to either be at the start or at the end of
the term.

Mr. Alfonso’s offer:

50000 1000000
0 1 2 3 4 …. 20

Mr. Co’s offer:

50000 40000 40000 40000 40000 40000

0 1 2 3 4 …. 20
GENERAL MATHEMATICS SHS SECOND QUARTER

Solution 1: Choose the focal date to be the start of the term. Since the
focal date is at 𝑡 = 0, compute for the present value of each offer.

Mr. Alfonso’s offer:

Since P50,000 is offered today, then its present value is still P50,000. The
resent value of P1,000,000 offered five years from now is, we shall use
the present value compound interest formula. Using:

𝐹 = 1000000 𝑗 = 0.05 𝑛=5

𝑃 = 𝐹 (1 + 𝑗)−𝑛
𝑃 = 1000000(1 + 0.05)−5
𝑃 = 783526.17

Hence, the present value is P 783,526.17. To know the fair market value
(FMV), we must add the amount of down payment (DP) to the present
value (P). Hence:
𝐹𝑀𝑉 = 𝐷𝑃 + 𝑃
𝐹𝑀𝑉 = 50000 + 783526.17
𝑭𝑴𝑽 = 𝟖𝟑𝟑𝟓𝟐𝟔. 𝟏𝟕

Mr. Co’s offer:

Compute the present value of a general annuity with quarterly payments

but with annual compounding at 5%.

First, find the equivalent rate of 5% compounded annually.

𝑚𝑡
𝑖 (𝑚 )
𝐹 = 𝑃 (1 + )
𝑚
For 𝑚 = 4 (quarterly) and 𝑡 = 1 (in years), we have:
4(1)
𝑖 (𝑚 )
𝐹 = 𝑃 (1 + )
4
Similarly, for 𝑖 (𝑚) = 0.05, 𝑚 = 1 (annually) and 𝑡 = 1 (in years), we have:
0.05 1(1)
𝐹 = 𝑃 (1 + )
1
GENERAL MATHEMATICS SHS SECOND QUARTER

The two 𝐹 values must be equal, so:

4( 1) ( )
𝑖 (𝑚 ) 0.05 1 1
𝑃 (1 + ) = 𝑃 (1 + ) Transitivity
4 1
4(1)
𝑖 (𝑚 ) 0.05 1(1)
(1 + ) = (1 + ) Dividing both sides by 𝑃.
4 1
4(1)
𝑖 (𝑚 )
(1 + ) = 1.05
4 Evaluating the expression on the
(𝑚 ) 4 right.
𝑖
(1 + ) = 1.05
4
𝑖 (𝑚 ) 4 Taking the fourth root of both
1+ = √1.05 sides of the equation.
4
𝑖 (𝑚 ) 4
= √1.05 − 1 Subtraction Property of Equality
4
𝑖 (𝑚 )
= 0.0122722 Simplifying the right side.
4
𝑖 (𝑚) = 0.0490888 Multiplication Property of Equality

Since 𝑖 (𝑚) is found, we can immediately solve for 𝑗 with 𝑚 = 4.

𝑖 (𝑚) 0.0490888
𝑗= →𝑗= → 𝑗 = 0.0122722
4 4

Substitute all the known value using the ordinary annuity formula for the
present value.
1 − (1 + 𝑗)−𝑛
𝑃 = 𝑅[ ]
𝑗
1 − (1 + 0.0122722)−20
𝑃 = 40000 [ ]
0.0122722
𝑷 = 𝟕𝟎𝟓𝟓𝟕𝟐. 𝟗𝟐

Hence, the fair market value is:

𝐹𝑀𝑉 = 𝐷𝑃 + 𝑃
𝐹𝑀𝑉 = 500000 + 705572.92
𝐹𝑀𝑉 = 755572.92
GENERAL MATHEMATICS SHS SECOND QUARTER

Comparing the two fair market values, Mr. Alfonso’s offer has a higher
market value.

The difference between the market values, Δ, of the two offers at the start
of the term is:
Δ = |𝐹𝑀𝑉1 − 𝐹𝑀𝑉2 |
Δ = 833526.17 − 755572.92
𝚫 = 𝟕𝟕𝟗𝟓𝟑. 𝟐𝟓

Solution 2: Choose the focal date to be the end of the term

Mr. Alfonso’s offer:

At the end of the term, P1,000,000 is valued as such (because this is the
value at 𝑡 = 5). The future value of P50,000 at the end of the term at 5%
compounded annually is given by:
𝐹 = 𝑃 (1 + 𝑖)𝑛
𝐹 = 50,000 (1 + 0.05)5
𝐹 = 50,000 (1.05)5
𝐹 = 50,000 (1.2762816)
𝑭 = 𝟔𝟑, 𝟖𝟏𝟒. 𝟎𝟖

Fair Market Value = Future Value + Lump Sum Payment

𝐹𝑀𝑉 = 63,814.08 + 1,000,000
𝑭𝑴𝑽 = 𝑷𝟏, 𝟎𝟔𝟑, 𝟖𝟏𝟒. 𝟎𝟖

Mr. Co’s offer:

The future value of ordinary annuity is given by:

( 𝟏 + 𝒋 )𝒏 − 𝟏
𝑭=𝑹 [ ]
𝒋
( 1 + 0.0122722 )20 − 1
𝐹 = 40,000 [ ]
0.0122722
( 1.0122722 )20 − 1
𝐹 = 40,000 [ ]
0.0122722
( 1.2762807 − 1
𝐹 = 40,000 [ ]
0.0122722
( 0.2762807
𝐹 = 40,000 [ ]
0.0122722
𝐹 = 40,000 (22.5127275)
𝑭 = 𝐏𝟗𝟎𝟎, 𝟓𝟎𝟗. 𝟏𝟎
GENERAL MATHEMATICS SHS SECOND QUARTER

The future value of P50,000 at the end of the term is P63,814.08, which
was already determined earlier. Thus,

Fair Market Value = Future Value + Future Ordinary Annuity

𝐹𝑀𝑉 = 63,814.08 + 900,509.10
𝑭𝑴𝑽 = 𝑷𝟗𝟔𝟒, 𝟑𝟐𝟑. 𝟒𝟖

Thus, Mr. Alfonso’s offer still has a higher market value, even if we solve
the focal date to be the end of the term. The difference between the market
values of the two offers at the end of the term is:

Δ = |𝐹𝑀𝑉1 − 𝐹𝑀𝑉2 |
Δ = 1,063,814.08 − 964,323.48
𝚫 = 𝑷𝟗𝟗, 𝟒𝟗𝟎. 𝟔𝟎

Check the present value using the difference between the market values
of the two FMV, P99,490.60.

𝐹 = 𝑃99,490.60 𝑛 = 5 𝑖 = 5% or 0.05
−𝒏
𝑷 = 𝑭 (𝟏 + 𝒊)
𝑃 = 99,490.60 (1 + 0.05)−5
𝑃 = 99,490.60 (1.05)−5
𝑃 = 99,490.60 ( 0.7835262)
𝑷 = 𝐏𝟕𝟕, 𝟗𝟓𝟑. 𝟒𝟗

What did you notice about the present value when we use the difference
between the fair market values of the two FMV?

ACTIVITY

Answer the following problems. (Use 6 or more decimal places. Final

answer rounded to nearest centavo.)

1. Mrs. Jarina wishes to sell her house and lot, Mrs. Cruz is offering
her P1,550,000 in cash while Mrs. Dalmacio is offering a down
payment of P150,000 and monthly periodic payments of P30,000 at
the end of each month for 5 years. Which of the offers should Mrs.
Jarina accept if money can be invested at 8% compounded quarterly
and how much is the difference between the offers in terms of their
equivalent cash values?
GENERAL MATHEMATICS SHS SECOND QUARTER

Note: a. Illustrate the cash flows of the two offers using time
diagrams.
b. Which has a better market value?

2. Due to COVID-19 pandemic, Darren wants to sell his used vehicle.

Mrs. Ebio is offering a down payment of P50,000 and monthly
payment of P6,000 payable at the end of each month for 4 years.
Mrs. Pingol is offering P300,000 cash. Which of the offers should
1
Darren accept if money can be invested at 8 2% compounded semi-
annually? Find the difference between the two offers.

REMEMBER

To find the fair market value, you will need the following:
a. Illustrate the cash flows of the two offers using time diagrams.
b. Choose a focal date.
c. Determine the values of the two offers at the chosen focal date.
d. Compute the Future and Present Value
Using the Compound Interest
𝑭 = 𝑷 (𝟏 + 𝒋)𝒏 → 𝑷 = 𝑭 (𝟏 + 𝒋)−𝒏
OR
Using the formula of Ordinary Annuity:
( 𝟏 + 𝒋 )𝒏 − 𝟏 𝟏 − ( 𝟏 + 𝒋 )−𝒏
𝑭=𝑹 [ ]→𝑷= 𝑹 [ ]
𝒋 𝒋
e. Compute the Fair Market Value start of the term
Fair Market Value = Down payment (DP) + Present Value (PV)
f. Compute for the difference between the market values of the two
offers at the end of the term
𝜟 = |𝐹𝑀𝑉1 – 𝐹𝑀𝑉2 |
GENERAL MATHEMATICS SHS SECOND QUARTER

CHECKING YOUR UNDERSTANDING

Read and analyze the given problem. Write your answer on a

separate sheet of paper. Show your complete solution.

Performance Task:

Find situations involving annuities in your home. For example:

• Look for an appliance store, find a certain appliance that you wish
to have. How much is the cost if it is (a) paid in full, or (b) paid by
installment.
• Look for a bank that offers loan such as; car, house and lot or
cash loan. Know their terms and conditions for the loans that they
offer.
• If you have known someone borrowing from a five-six
moneylender, you can ask how much will be the charged if you
want to loan 5,000 payable in 1 year.
1. For the situation you choose, determine the interest rate for the
period and the annual interest rate.
2. Illustrate using time diagram. Compute for the Fair Market Value.
3. Based on the interest rates you computed, do you think it is good
idea to loan? Discuss.

NOTE: Since face to face is not allowed, you can search through internet
to perform this task. (ONLINE). You can search for appliance store, bank
or message someone you know who works in a bank or appliance store,
someone who are moneylender. Make sure that you will write the site that
you used for your research. Below Rubric for this Performance Task.
GENERAL MATHEMATICS SHS SECOND QUARTER

POSTTEST

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

Bank A offers P150,000 at the end of 3 years plus P300,000

at the end of 5 years. Company offers P25,000 at the end of each
quarter for the next 5 years. Assume that money is worth 8%
compounded semi-annually.

1. What is the fair market value of Bank A?

A. P118,547.18 C. P321,216.43
B. P202,669.25 D. P409, 560.47

2. What is the fair market value of Bank B?

A. P 118,547.18 C. P 321,216.43
B. P 202,669.25 D. P 409, 560.47

3. Which bank has a better market value?

A. Bank A C. Both banks

B. Bank B D. None
GENERAL MATHEMATICS SHS SECOND QUARTER

G11 SLEM # 12 – WEEK 4 – 2nd QUARTER

DEFERRED ANNUITY

OVERVIEW
This module was designed and written with you in mind. It is here to
help you understand calculating the present value and period of deferral of
a deferred annuity. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse
vocabulary level of students. The lessons are arranged to follow the standard
sequence of the course. But the order in which you read them can be
changed to correspond with the textbook you are now using. The module
focuses on achieving this learning competency:

Calculate the present value and period of deferral of a deferred

annuity

After going through this module, you are expected to:

• give examples of deferred annuity in real-life situations, and
• find the present value and period of deferred annuity.

PRETEST

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. Find the quarterly payment for 21 quarters to discharge an

1
obligation of P120,000, if money worth 4 2 % compounded quarterly
and the first payment is due at the end of 3 years and 9 months.
A. P8,451.00
B. P7,541.01
C. P 6,154.02
D. P5,571.03

2. At 10% converted semi-annually, find the present value of 10 semi-

annually payments of P 8,500 each, the first due is due in 5½ years.

A. P60,942.04
B. P50,492.04
C. P40,294.04
D. P30,249.04
GENERAL MATHEMATICS SHS SECOND QUARTER

3. In a series of monthly payments of P7500 each, the first payment is

due at the end of 6 years and the last at the end of 11 years and 9
months. If money is worth 3.5% compounded monthly, find the
present value of the deferred annuity.

A. P349,976.08
B. P349,873.08
C. P349,766.08
D. P349,673.08

LOOKING BACK
Let us recall the following terms in annuity:
• Annuity - is a sequence of payments made at equal (fixed) intervals
• Annuity Immediate or Ordinary Annuity - a type of annuity in which
the payments are made at the end of each period.
• Deferred Annuity – an annuity wherein the first payment interval does
not coincide with the first interest period. The first payment off to some
later date.
• Period of Deferral – length of time from the present to the beginning
of the first payment.
• Amount of a deferred annuity of 𝒏 payment is equivalent to amount
of 𝑭 of an ordinary annuity of 𝒏 payments.

BRIEF INTRODUCTION OF THE LESSON

Examples of this deferred annuity in real life:

1. A credit card company offering its clients to purchase today to start

paying monthly whether 3 months, 6 months, …, 24 months
depends on the choice of the clients.
2. A real estate agent is pleading the buyer to purchase a
condominium unit now and start paying after 2 years when the
condominium is ready for occupancy.
3. A worker who has gained extra income now and wants to save his
money so that he can withdraw his monthly starting on the day of
his retirement from work.

The present value 𝑃𝑑𝑒𝑓 of an annuity deferred for d periods is the value of
the annuity or the value of the 𝑛 payments in lump sum amount at the
beginning of the term.
GENERAL MATHEMATICS SHS SECOND QUARTER

Since the amount of a deferred annuity n payment is equivalent to amount

of F of an ordinary annuity of n payments. Let us illustrate the deferred
annuity using time diagram.

Ordinary annuity of n payments

Value of same annuity of n Translated for d periods
payments at one period
before 1st payment date
which is the end of d period
Deferred annuity of n payments

Pdef Discount P for d periods P F

________ _ _ _ R R_ _ _ _ R R R
0 1 2 … d-2 d-1 d d+1 d+2 … d+(n-2 ) d+(n-1) d+n

No payment for d periods

𝒅 = period of deferment 1st payment starts on the (𝑑 + 1)nth period

Therefore, from the time diagram we can now derived the deferred annuity
formula using the present value formula:
𝟏 − ( 𝟏 + 𝒋 )−𝒏
𝑷𝒅𝒆𝒇 = 𝑹 [ ] (𝟏 + 𝒋)−𝒅
𝒋
Or equivalently,
𝟏 − (𝟏 + 𝒋)−(𝒌+𝒏) 𝟏 − (𝟏 + 𝒋)−𝒌
𝑷=𝑹 −𝑹
𝒋 𝒋

where
𝑅 = is the regular payment,
𝑗 = is the interest rate per period,
𝑛 = is the number of payments,
𝑑 or 𝑘 = is the number period of deferment
(or number of artificial payments)

Examples: Find the present value of a P5,000 annuity payable

1
quarterly for 7 years but deferred for 52 year. Money is worth 9.6%
compounded quarterly.

Given: 𝑅 = 5,000 𝑡 = 7 years 𝑚=4 𝑖 (𝑚) = 9.6% = 0.096

Find 𝑃𝑑𝑒𝑓 :
GENERAL MATHEMATICS SHS SECOND QUARTER

Solution:
1
The period of deferral is also given in the problem which is 5 2 years. We can
solve for 𝑑.
𝑑 = period of deferral × 𝑚
11
𝑑 = ( ) (4) → 𝒅 = 𝟐𝟐
2

We also find the number of compounding periods, 𝑛 and the rate of interest
per period, 𝑗, using the formulas we had in the earlier modules:

𝑛 = 𝑚𝑡 → 𝑛 = (4)(7) → 𝒏 = 𝟐𝟖
𝑖 (𝑚) 0.096
𝑗 = →𝑗= → 𝒋 = 𝟎. 𝟎𝟐𝟒
𝑚 4

For convenience, we prepare a time diagram:

Pdef P28

d = 22 n = 28
___ 5,000 5,000_ R 5,000
5,000
0 1 2 … 20 21 22 23 24 … 49 50

1st payment starts on the 23rd period

NOTE: n = (last – first) + 1
28 last – 23+1
29 = last – 22

Solve the Deferred Annuity by substituting all the known values in the formula:
1 − ( 1 + 𝑗 )−𝑛
𝑃𝑑𝑒𝑓 = 𝑅 [ ] (1 + 𝑗)−𝑑
𝑗
1 − ( 1 + 0.024 )−28
𝑃𝑑𝑒𝑓 = 5,000 [ ] (1 + 0.024)−22
0.024
1 − ( 1.024 )−28
𝑃𝑑𝑒𝑓 = 5,000 [ ] (1.024)−22
0.024
1 − 0.514755758
𝑃𝑑𝑒𝑓 = 5,000 [ ] (0.593472984)
0.024
0.485244242
𝑃𝑑𝑒𝑓 = 5,000 ( ) (0.593472984)
0.024
𝑃𝑑𝑒𝑓 = 5,000 (20.21851008)(0.593472984)
𝑷𝒅𝒆𝒇 = 𝑷𝟓𝟗, 𝟗𝟗𝟓. 𝟕𝟎

Thus, the present value of the deferred annuity is P 59,995.70.

GENERAL MATHEMATICS SHS SECOND QUARTER

Example: Lowell is planning to buy a pension plan for himself on his

th
40 birthday. This plan will allow him to claim P30,000 quarterly for 5 years
starting 3 months after his 60th birthday. What one-time payment should he
make on his 40th birthday to pay off this pension plan, if the interest rate is
8% compounded quarterly?

Given: 𝑅 = 30000 𝑡 = 5 years 𝑚=4 𝑖 (𝑚) = 0.08

Find 𝑃𝑑𝑒𝑓 :
Solution:
The period of deferral is also given in the problem which is 20 years. We can
solve for 𝑑.

𝑑 = period of deferral × 𝑚
𝑑 = (20)(4) → 𝒅 = 𝟖𝟎

Note that the value of 𝑑 is also the same as the value of 𝑘. (We are going to
use the alternative formula.)

We also find the number of compounding periods, 𝑛 and the rate of interest
per period, 𝑗, using the formulas we had in the earlier modules:

𝑛 = 𝑚𝑡 → 𝑛 = (4)(5) → 𝒏 = 𝟐𝟎
𝑖 (𝑚) 0.08
𝑗 = →𝑗= → 𝒋 = 𝟎. 𝟎𝟐
𝑚 4

P ___ 30,000 30,000 _ _ _ _ _30,000

0 1 2 … 80 81 82 83 … 100

1 − (1 + 𝑗)−(𝑘+𝑛) 1 − (1 + 𝑗)−𝑘
𝑃=𝑅 −𝑅
𝑗 𝑗
−(80+20)
1 − (1 + 0.02) 1 − (1 + 0.02)−80
𝑃𝑑𝑒𝑓 = 30,000 − 30,000
0.02 0.02
1 − (1.02)−100 1 − (1.02)−80
𝑃𝑑𝑒𝑓 = 30,000 − 30,000
0,02 0.02
1 − 0.13803297 1 − 0.20510973
𝑃𝑑𝑒𝑓 = 30,000 − 30,000
0,02 0.02
1 − 0.13803297 1 − 0.20510973
𝑃𝑑𝑒𝑓 = 30,000 − 30,000
0,02 0.02
0.86196703 0.79489027
𝑃𝑑𝑒𝑓 = 30,000 − 30,000
0,02 0.02
𝑃𝑑𝑒𝑓 = 30,000( 43.0983516) − 30,000(39.74451)
𝑃𝑑𝑒𝑓 = 1,292,950.50 − 1192335.41
𝑷𝒅𝒆𝒇 = 𝐏𝟏𝟎𝟎, 𝟔𝟏𝟓. 𝟏𝟒

Therefore, the present value of Lowell’s monthly pension is

P100,615.14
GENERAL MATHEMATICS SHS SECOND QUARTER

ACTIVITY

A. Find the period of deferral in each of the following deferred annuity

problem. (Note: One way to find the period of deferral is to count the
number of artificial payments)

1. If Maro’s monthly payments of P3,000 for 5 years that will start 7

months from now, find the period of deferral.
2. Suppose that Lowell’s annual premium payments in his life insurance
of P8,000 for 15 years will start 5 years from now.
3. Thess quarterly payments for her health insurance of P6,000 for 6
years that will start three years from now.
4. Paolo applied for a housing loan which his semi-annual payments of
P60,000 for 15 years that will start 5 years from now.
5. Susan gained an extra income and she wants to save P30,000 every
2 years for 8 years starting at the end of 4 years.

B. Answer the following problems completely. (Use separate sheet for the
computation

1. Joanne availed of an emergency loan offered by GSIS that gave her an

option to pay P5,550 monthly for 3 years. The first payment is due after
6 months. How much is the present value of the loan if the interest rate
is 9.5% compounded monthly?
2. Mr. and Mrs. Cabuslay decided to buy a car. They made the down
payment of P250,000 and they will pay P26,800 monthly for 5 years.
The first payment is due after 3 months. How much is the present value
of the car if the interest rate is 3.92% convertible monthly?
3. Ivan purchased a laptop through the credit card of his colleague. The
credit card company provides an option for a deferred payment. Lowell
decided to pay after 6 months of purchase. His monthly payment is
computed as P2,800 payable in 18 months. How much is the cash value
of the laptop if the interest rate is 7.5% converted monthly?
GENERAL MATHEMATICS SHS SECOND QUARTER

REMEMBER

To find the deferred annuity

a. Read and analyze the given problem.
b. Make a time diagram.
c. Determine all the known values.
d. Solve the deferred annuity by substituting all the known values in
the formula:
𝟏− ( 𝟏+𝒋 )−𝒏
𝑷𝒅𝒆𝒇 = 𝑹 [ ] (𝟏 + 𝒋)−𝒅
𝒋
𝟏 − (𝟏 + 𝒋)−(𝒌+𝒏) 𝟏 − (𝟏 + 𝒋)−𝒌
𝑷=𝑹 −𝑹
𝒋 𝒋
where
𝑅 = is the regular payment,
𝑗 = is the interest rate per period,
𝑛 = is the number of payments,
𝑑 or 𝑘 = is the number period of deferment
(or number of artificial payments)

CHECKING YOUR UNDERSTANDING

Choose the letter of the correct answer. Then write it on a separate

sheet of paper.

1. Find the present value of a deferred annuity of P900 every 3 months

for five years that is deferred 3 years, if the money is worth 10%
compounded quarterly.

A. P 10,234.27 B. P 10,324.27 C. P 10,432.27

2. Sarah converted her loan to light payments which gives her an option
to pay P4,800 every six months for 7 years, if the first payment is made
in 4 years and money is worth 11% compounded semi-annually. How
much is the amount of the loan?

A. P 32,642.94 B. P 31,642.93 C. P 30,642.92

3. Dexter made a series of quarterly payments of P5,700 each in his loan,

the first payment is due at the end of 5 years and the last at the end of
10 years and 9 months. How much is the amount of the loan if the
interest rate is 6% converted quarterly?

` A. P 86,041.96 B. P 86,041.86 C. P 86,041.76

GENERAL MATHEMATICS SHS SECOND QUARTER

4. Find the present value of 10 semi-annual payments of P7,500 each,

the first due in 5 years if the interest rate is 11% converted semi-
annually.

A. P 33,075.76 B. P 33,085.70 C. P 33,095.67

5. A certain fund is to be established today in order to pay for the P5,000

worth of monthly rent for a car. If the payment for the car rental will start
next year and the fund must be enough to pay for the monthly rental
for 2 years, how much must be deposited at 2.5% interest compounded
monthly?

A. P 116,930.64 B. P 115,844.60 C. P 114,046.58

POSTTEST

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. What is the period of deferral for payments of P6,000 every 4 months

for 10 years that will start five years from now?

A. 5 periods C. 12 periods
B. 9 periods D. 14 periods

2. If money is worth 9.75% semi-annually, find the present value of 12

semi-annual payments of P10,000 each, the first payment is due in
6½ years?

A. P45,175.59 C. P50,975.59
B. P48,075.59 D. P53,875.59

3. Nestor plans to buy a 55” slim smart television set with monthly
payments of P5,000 for 2 years. A credit card company offers a
deferred payment option for the purchase of this television set and the
payments will start at the end of 3 months. How much is the cash price
of the 52” slim smart TV set if the interest rate is 9.5% compounded
monthly?

A. P107,194.11 C. P113,123.15
B. P109,415.21 D. P116,514.24