It’s All About Annuities

Module in General Mathematics

Grade 11
Second Quarter (Week 4)

MARIEBELLE F. ANTONIO
Developer

Department of Education • Schools Division of Benguet

 Republic of the Philippines
DEPARTMENT OF EDUCATION
Cordillera Administrative Region
SCHOOLS DIVISION OF BENGUET
Wangal, La Trinidad, Benguet

COPYRIGHT NOTICE

2020

Section 9 of Presidential Decree No. 49 provides:

“No copyright shall subsist in any work of the Government of the

Philippines. However, prior approval of the government agency of office wherein
the work is created shall be necessary for exploitation of such work for profit.”

This material has been developed for the implementation of K-12 Curriculum through
the Curriculum Implementation Division (CID)—Learning Resource Management and
Development System (LRMDS). It can be reproduced for educational purposes and
the source must be acknowledged. Derivatives of the work including creating an edited
version, an enhancement or a supplementary work are permitted provided all original
work is acknowledged and the copyright is attributed. No work may be derived from
this material for commercial purposes and profit.

ii
 PREFACE

This module is a project of the Curriculum Implementation Division particularly

the Learning Resource Management and Development Unit, Department of
Education, Schools Division of Benguet which is in response to the implementation of
the K to 12 Curriculum.

This Learning Material is a property of the Department of Education- CID,

Schools Division of Benguet-CAR. It aims to improve students’ performance
specifically in General Mathematics.

This learning module focuses on a competency that can be delivered

online, modular, print or digitized materials and applicable from home schooling of
home study, needing enough supervision from parents or adult or brother or sister.

Date of Development : May 2020

Resource Location : SDO-Benguet-LRMS
Tublay District
Learning Area : General Math
Grade Level : 11
Learning Resource Type : Module
Language : English
Quarter/Week : Q2/W4
Learning Competency/Code : finds the future value and present value of both
simple annuities and general annuities
M11GM-IIc-d-1
: calculates the fair market value of a cash flow
stream that includes an annuity.
M11GM-IId-2
: calculates the present value and period of
deferral of a deferred annuity. M11GM-IId-3

iii
 ACKNOWLEDGEMENT

The developer wishes to express her gratitude to those who help in the
development of this learning material. The fulfillment of this learning material would
not be possible without these people who gave their support, helping hand and
cooperation.

To our Almighty Father who is pouring me with wisdom to develop this module,
nurturing me with good health, giving me strength to continue pursuing this mission to
be of great help to the learners.
My Superiors who extends their assistance and handed me help to complete
this undertaking.

My family who patiently bear with me in doing this module, their care and love,
encouraging words not to retreat, sharing their brilliant ideas to accomplish this
learning material.

My colleagues who willingly impart their knowledge to improve my output.

The Education Program Supervisor for Math, Wilfred C. Bagsao, PhD the
Evaluators and the Division Learning Resource Management and Development
System Staff and the Consultants.

DIVISION LRMDS STAFF:

MELVIN L. ALFREDO ANTIONNETE D. SACYANG

Librarian II Project Development Officer II

SONIA D. DUPAGAN, EdD

EPS-LRMDS

CONSULTANTS:

RIZALYN A. GUZNIAN, EdD

Chief, Curriculum Implementation Division

NESTOR L. BOLAYO
Office of the Assistant Schools Division Superintendent

BENILDA M. DAYTACA, EdD

Schools Division Superintendent

iv
 TABLE OF CONTENTS

Contents Page
Copyright notice .......................................................................................................................... ii
Preface ....................................................................................................................................... iii
Acknowledgement ...................................................................................................................... iv
Table of Contents ......................................................................................................................... v
Title Page..................................................................................................................................... 1
What I Need To Know .................................................................................................................. 2
What I Know ................................................................................................................................ 3
What’s In ..................................................................................................................................... 4
What’s New ................................................................................................................................. 5
What Is It ..................................................................................................................................... 6
What’s More.............................................................................................................................. 23
Activity 1.............................................................................................................................. 23
Assessment 1 ..................................................................................................................... 23
Activity 2.............................................................................................................................. 23
Assessment 2 ..................................................................................................................... 26
Activity 3.............................................................................................................................. 26
Assessment 3 ..................................................................................................................... 28
What I Have Learned .................................................................................................................. 28
What I Can Do ............................................................................................................................ 29
Post Test.................................................................................................................................... 29
Additional Activity ..................................................................................................................... 31
Answer Key................................................................................................................................ 32
References................................................................................................................................. 35

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Title Page

It’s All About Annuities!

Module in General Mathematics

Grade 11
Second Quarter(Week 4)

MARIEBELLE F. ANTONIO
Developer

Department of Education • Schools Division of Benguet

 What I Need to Know

This module would be all about Simple and General Annuities: Present and
Future Value. This is another learning that would help the learners understand that
money at present is more valuable than money in the future. How could it be? You
might argue with this statement or agree later when we realize how could you get back
more of the money that you put in.
The learner concentrates on the Present and Future Value of a Simple and
General Annuities, cash flow related to annuities and deferral annuity. This module
would focus more on ordinary annuity. The learner shall provide a separate sheet of
paper to write or show the complete solutions on all the activities in this module. This
learning material shall be taken with the assistance of a facilitator or parent. The
facilitator or parent could also be an instrument in understanding further concepts
related to this lesson. They are expected to check and record the scores of the learners
in each of the activity to be taken in this module.
Specifically, this module focuses on finding the future value and present value
of both simple annuities general annuities with a code M11GM-IIc-d-1, calculates the
fair market value of a cash flow stream that includes an annuity with a code M11GM-
IId-2 and calculates the present value and period of deferral of a deferred annuity with
a code M11GM-IId-3.
This learning module focuses also on the following specific Learning
Objectives. At the end of this learning module, learners are expected to:
1. compute the present and future value of a simple and general annuity;
2. calculate the fair market value of a cash flow stream that includes annuity;
&
3. solve for the present and period of deferral of a deferred annuity.
Here is a simple guide for you in going about the module:

1. Read and follow the instructions carefully.

2. Answer the pretest to determine how much you know about the content of this
module.
3. Check your answers against the correct answers provided at the last page of
the module.
4. Be very honest in answering the test for you to gauge what you already know
in this topic.
5. Read the different lessons included in this module.
6. Perform all the activities, as these will help you have a better understanding of
the topic.
7. Take the self-tests at the end of each lesson.
8. Finally, take the post-test at the end of the module.

Good Luck and have fun!

2
 What I Know

Direction: Answer the following problems completely on as separate sheet of paper.

Use CAPITAL LETTERS to indicate your chosen answer.
Pre-test assessment guidelines:
- 100% correct – proceed with the module to enhance learning
- 50% to 99% correct – proceed with the module
For nos. 1-2, use the following problem:
Find the present and future value of a semi-annual payments of ₱500 at the end of
each term for 8 years with interest rate of 4% compounded annually.
1.Present Value:
A. ₱9,305.18 B. ₱6, 799.62 C. ₱9,305.18 D. ₱21,586.63
2.Future Value:
A. A. ₱9,305.18 B. ₱6, 799.62 C. ₱9,305.18 D. ₱21,586.63
For nos. 3-5, use the following problem:
Given the regular payment of ₱1500, payment interval of 6 months in 3 years with
an interest rate of 6% compounded monthly.
3. Find the equivalent rate
A. 6.17% B. 3.04% C. 6% D. 0.5%
4. Find the present value
A. ₱8,115. 03 B. ₱13,742.36 C. ₱9,712.36 D. ₱10,462.98
5. Find the future value
A. ₱8,115. 03 B. ₱13,742.36 C. ₱9,712.36 D. ₱10,462.98
6. ₱1000 deposited every month for 5 years at 9% per year compounded monthly.
What is the future amount of the simple annuity?
A.₱5,984.71 B.₱75,424.14 C. ₱289,497.95 D. ₱124,450.43
7. What is the future value of a Quarterly payment of ₱5000 for 10 years with interest
of 3% compounded quarterly?
A.₱232,232.41 B.₱41,377.36 C. ₱5000 D. ₱172,234.69
8. Annual payments of ₱95,000 with interest rate of 9% compounded annually for 6
years. From the problem, what is the term of annuity (t)?
A.₱95,000 B.9% C. 6 D. 72
9. A monthly installment of ₱2999 of an appliance for 6 months with 7%
compounded monthly. What is the beginning cost of the appliance?
A.₱21,452.72 B.₱28,548.00 C. ₱17,632.27 D. ₱18,258.47
10. Mr. John paid ₱200,000 as down payment for a farm. The remaining amount is
to be settled by paying ₱16,200 at the end of each month for 5 years. If interest is 5
% compounded semi-annually, what is the present value of the farm?
A. ₱1,101,541.14 B. ₱1,058,566.16 C. ₱306,654.49 D. ₱858,566.16
11. Mr. John paid ₱200,000 as down payment for a farm. The remaining amount is
to be settled by paying ₱16,200 at the end of each month for 5 years. If interest is 5
% compounded semi-annually, what is the cash price of the farm?
A. ₱1,101,541.14 B. ₱1,058,566.16 C. ₱306,654.49 D. ₱858,566.16
12. Find the present value pf a deferred annuity of ₱1,000 for every end of the month
for 8 years that is deferred for 5 years. The money is worth 25% compounded
monthly.
A. ₱14, 548.24 B. ₱15,547.54 C. ₱15, 547.70 D. ₱15,179.91

3
13. Find the present value of an annuity of ₱4,200 quarterly for 8 years that is
deferred for 5 years. The money is worth 16% compounded quarterly.
A. ₱26, 562.14 B. ₱34,260.47 C. ₱42,546 D. ₱30,514.25
For Nos. 14-15. Identify the number of deferred periods.
14. The quarterly payment of the annuity deferred for 4 years.
A. d=16 B. d=39 C. d=7 D. d=15
15. The first quarterly payment of the annuity is due at the end of 3 years and the
last payment is due at the end of 5 years.
A. d=16 B. d=39 C. d=7 D. d=15

What’s In

This review and motivational section will help you recall on identifying different
elements in a word problem to be able to solve the problem correctly.
Who/What Am I?
Direction: Name the element of each of the following problems.
Sylvia lends ₱55,000 for 5 years at 6% compounded
semi-annually. Find the future value and interest of this
amount.

₱55,000
6%
5 years
Sylvia
2
10
Yohan Yohan
deposited Present
₱10,000 in a value
bank which time
gives 1%
compounded nominal rate
quarterly and let frequency of
it stay there for 7 conversion
years. Find the n
maturity value
and interest. bank

4
 What’s New

Let’s say you want to save money to go on a vacation, or you want to save
money now for your college education. Annuity is a strategy for saving a little bit of
money in the present and having a big payoff in the future.
This learning material centers on computing for the present and future value of
a general annuity particularly ordinary annuity where the payment is made at the end
of the payment interval
Present Value vs. Future Value
You get ₱5000 a week for 10 years!
How? You need to buy it!
Pay it in large amount then they pay you back with a series of payments over time
Let us explore! We buy an annuity worth ₱50,000 and in return we get ?
Let us start with knowng the value of ₱50,000 NOW

Direction: Follow the process in identfying the value of ₱50,000 NOW and AFTER
by following the calculations below.
Your second
10% interest rate payment is 2
on ₱50,000 years from now. 10% interest rate
annuity of 4 on ₱50,000 ₱50,000 𝑥1.10
How do we
yearly payments calculate that? annuity of 4 yearly 𝑥1.10 =
Bring it back one payments of
year, & then for ₱50,000
₱50,000 ÷ 1.10 another year
Your first payment
₱50,000 ÷ 1.10 of ₱50,000 is next The third payment
Your first year… how much can also be
÷ 1.10
payment of is the earned
₱50,000 is next interest?
year… how much The third and
is that worth fourth payment
now? can also be ₱50,000 𝑥1.10𝑥1.10 ₱50,000 𝑥1.10
brought back to
𝑥1.10 = =
today’s values
₱50,000 ÷ 1.10
÷ 1.10 3rd Payment: Your second
₱50,000 ÷ 1.10 payment is 2 The 4th payment
÷ 1.10 ÷ 1.10 = years from now. ₱50,000
How do we
calculate
4th payment: that?move to one
₱50,000 ÷ 1.10 year
÷ 1.10 ÷ 1.10 AMOUNT LATER:
AMOUNT NOW: ÷ 1.10 =

5
 What Is It

Often times we heard from a television or radio commercial say “12 easy equal
monthly payments” for buying a certain product. This describes a sequence of
payments of equal amounts. This payment method applies to an enormous number of
financial situations.
We will be learning the present and future value of a simple and general annuity
focusing on ordinary annuity. It is used whenever there are regular payments for a
debt, pension, paying a house, car loans, and installment payment for appliance
purchases, home mortgages and all sorts of other financial arrangements. There are
powerful formulas to be used to identify the present and future value of an annuity
through the process which was done in the previous activity.
Scope of the Grade 11 curriculum Annuity Due and Contingent Annuity are
NOT emphasized in Grade 11 mathematics. Thus, unless otherwise specified, the
term `annuity' refers to an Ordinary Annuity and an Annuity Certain i.e., an annuity
with a definite term, and where payments are made at the end of each period.
Simple Annuity is an annuity where the interest conversion or compounding period
is equal to or the same as the payment interval.
FUTURE VALUE

DEFINITION
FUTURE VALUE of an ANNUITY (F) is the sum of all the periodic payments at
the end of the term. It tells us how much the accumulated ending balance is.

NOTATIONS
F= amount (future value) of ordinary annuity
P- present value of ordinary annuity
R- periodic payment
t- term of annuity
𝑖 (𝑚) − 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚
m- number of conversions per year
j- interest rate per period
NOTE: The notations are the same with compound interests.

6
 Periodic Payment
Illustrative Example 1:
Suppose Mrs. Remoto would like to save ₱3,000.00 at the end of each
month,
Term of for
annuity Interest rate No. of conversions per year

six months, in a fund that gives 9% compounded monthly.

Future value

How much is the amount or future value of her savings after 6 months?
From the underlined terms in the problem we could identify the given or notations to
be use.

F=? The problem could be illustrated through the diagram:

R- ₱3,000.00
t- six months
𝑖 (𝑚) = 9% = 0.09
m- 12 (monthly)
𝑖 (𝑚) 0.09
𝑗= = = 0.0075
𝑚 12

Notice in the diagram that the

periodic payment is ₱3,000.00
for six payment intervals for six months. The rate shall be divided by 12 since the
interest rate is compounded monthly which is very similar in solving for compound
interest. The ₱3,000.00 deposited at the end of the 1st month will draw interest for five
months and so on. As to the last month the last payment of ₱3,000.00 at the end of
the month will not draw interest. So, add up the entire amount to get the future value
which is ₱18,340.90.
It is easier to use the formula for future value.

Process Solution
Identify the given R- ₱3,000.00
t- six months
𝑖 (𝑚) = 9% = 0.09
m- 12 (monthly)

7
 𝑖 (𝑚) 0.09
𝑗= = = 0.0075
𝑚 12
n= 6 since it is equal to number of
payments
Substitute the given in the formula (1 + 𝑗)𝑛 − 1
𝐹=𝑅
𝑗
(1 + 0.0075)6 − 1
𝐹 = ₱3,000.00
0.0075
Work inside the parenthesis first. (1.0075)6 − 1
𝐹 = ₱3,000.00
0.0075
Work in the numerator and divide the 𝐹 = ₱18,340.89
result with the denominator. Multiply the
result to 3000. You can directly input the
values using a calculator to have an
accurate answer.
Illustrative example no.2
Term of annuity
Periodic Payment

If you pay ₱5,000.00 at the end of each month for 40 years with an account that
pays 8% compounded monthly, how much money do you have after 40 years?

Interest rate No. of conversions per year Future Value

The following are the given and its diagram:

F=?
R- ₱5,000.00
t- 40 years
𝑖 (𝑚) = 8% = 0.08
m- 12 (monthly)
𝑖 (𝑚) 0.08
𝑗= =
𝑚 12
= 0.006667
n= mt= 12(40)
=480

Notice in the diagram that the number of payments would be 480 and it would be
difficult for us to solve using the diagram. So, we make use of the formula for future
value.
Process Solution
Identify the given F=?
R- ₱5,000.00
t- 40 years
𝑖 (𝑚) = 8% = 0.08
m- 12 (monthly)
𝑖 (𝑚) 0.08
𝑗= = = 0.006667
𝑚 12

8
 n= mt= 12(40) =480
The term of annuity is 40 years which is
not equal to the payments interval thus
we multiply the number of conversions
per year which is 12 since it is monthly to
the term of annuity which is 40 years.
Substitute the given in the formula (1 + 𝑗)𝑛 − 1
𝐹=𝑅
𝑗
(1 + 0.006667)480 − 1
𝐹 = ₱5,000.00
0.006667
Work inside the parenthesis first. (1.006667)480 − 1
𝐹 = ₱5,000.00
0.006667
Work in the numerator and divide the 𝐹 = ₱17,457,060.05
result with the denominator. Multiply
the result to 5000. You can directly
input the values using a calculator to
have an accurate answer.
PRESENT VALUE OF a SIMPLE ANNUITY is the sum of all the present values of the
periodic payments at the beginning of the term. It gives us the time value of money at
the present market interest rates.
This was the diagram shown in the previous activity.

Periodic Payment

ILLUSTRATIVE EXAMPLE:
Gemma decided to buy a TV with an installment payment of ₱3,000.00 at the end of
each month for six months with an interest of 9% compounded monthly.

Term of Annuity Interest rate No. of conversions per year

How much is the present value of the TV? Present Value

9
Illustrate the problem through the diagram by showing the discounted payment for
each term.
NOTE: We could also
use the
₱3,000.00(1.0075)−2
instead of ₱3,000.00 ÷
(1.0075)2 since they
are equivalent.
Remember that when
we make the exponent
positive and if it is in the
numerator it shall be
placed in the
denominator and if it is
in the denominator it
shall be placed in the
numerator.
We will be learning the present and future value of a general annuity focusing
on ordinary annuity. This module focuses only on General Ordinary Annuity.
General Annuity is an annuity where the payment interval is not the same as the
interest compounding period.
General Ordinary Annuity is a general annuity in which the periodic payment is made
at the end of the payment interval.

Before proceeding to the future and present value of general annuity, let us learn how
to convert interest rate to its equivalent interest rate.
For example: Converting 12% compounded monthly to an equivalent rate
compounded annually for 2 years.
We will be using the following formula for equivalent rates:
𝐹1 = 𝐹2
F is referring to the future value formula of compound interest
𝑃(1 + 𝑗)𝑛 = 𝑃(1 + 𝑗)𝑛
𝑖 (𝑚)
Remember: 𝑗 = ; 𝑛 = 𝑚𝑡
𝑚

Instead of n substitute mt Instead of

𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) n
𝑃(1 + ) = 𝑃(1 + )𝑚𝑡 substitute
𝑚 𝑚 mt

Instead of j Instead of j
𝑖 (𝑚) 𝑖 (𝑚)
substitute 𝑚
; substitute ;
𝑚
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Illustrative Example:
Convert 12% compounded monthly to _____ compounded annually
𝐹1 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦; 𝐹2 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦
𝐹1 = 𝐹2
𝑃(1 + 𝑗)𝑛 = 𝑃(1 + 𝑗)𝑛
𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
𝑃(1 + ) = 𝑃(1 + )
𝑚 𝑚
Divide both sides by P
𝑖 (𝑚) 𝑖 (𝑚)
𝑃(1 + 𝑚 )𝑚𝑡 𝑃(1 + 𝑚 )𝑚𝑡
=
𝑃 𝑃
P would be cancelled and result to:
𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
(1 + ) = (1 + )
𝑚 𝑚
𝐹1 will be the future value for interest compounded annually, 𝐹2 will be the future value
for interest compounded monthly.
Process Solution
Given:Compounded Annually m=1
Given : 12% compounded monthly m= 12
𝑖 (𝑚) = 12%
(1)
Find the equivalent rate or 𝑖 12% compounded monthly to
______compounded annually
Convert 12% percent to decimal form by 12%=0.12
removing the percent sign and move the
decimal point 2 places to the left.
Substitute it in the formula 𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
(1 + ) = (1 + )
𝑚 𝑚
(1)(𝑡)
𝑖 (1) 0.12 (12)(𝑡)
(1 + ) = (1 + )
1 12
1 (𝑡)
Get rid of t by raising both sides by 𝑡 𝑖 (1) 1 0.12 (12𝑡) 1
[(1 + ) ] 𝑡 = [(1 + ) ]𝑡
1 12
Cancel t that would result to 𝑖 (1) 0.12 (12)
(1 + ) = (1 + )
1 12
Simplify the left side of the equation by 0.12 (12)
1 + 𝑖 (1) = (1 + )
dividing 𝑖 (1) by 1 . 12
Subtract 1 on both sides of the equation 0.12 (12)
𝑖 (1) = (1 + ) −1
to isolate 𝑖 (1) at the left side of the 12
equation.
Work inside the parenthesis first but we 𝑖 (1) = 0.126825
could directly input it in the calculator to
solve for the value of 𝑖 (1)
Divide 0.12 by 12 and then add the result
to 1.
The result would be raised to 12 and
subtract 1.

11
Shift the decimal point to the right twice 𝑖 (1) = 12.6825%
and affix the percent sign.

NOTE: NUMBER OF DECIMAL PLACES

When solving for equivalent rate, we get the six or more decimal places.

FUTURE VALUE OF A GENERAL ANNUITY

ILLUSTRATIVE EXAMPLE :

Process Solution
Identify the given. R= ₱1,000.00
t= 15
m=4 (compounded quarterly)
𝑖 (𝑚) = 6%
Solve for n. 𝑛 = 𝑚𝑡
n pertains to the number of payments 𝑛= (12)(15) = 180
thus if we look into the problem do not be For n notice that m is equal to 12 not 4
confused with the value of m. since n pertains to the number of
For this we will be using m=12 since the payments and in the problem it was
payment is to be done monthly. stated that the amount will be deposited
monthly thus the number of payments to
be made after 15 years is 180 payments.
While m=4 is to be used for the
equivalent rates.
Convert 6% percent to decimal form by 6%=0.06
removing the percent sign and move the
decimal point 2 places to the left.
Solve for the equivalent rates. 6% compounded quarterly to
compounded monthly.
Substitute the given in the formula. 𝐹1 = 𝐹2
𝐹1 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦; 𝑚 = 12

12
 𝐹2 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 ; 𝑚 = 4 𝑃(1 + 𝑗)𝑛 = 𝑃(1 + 𝑗)𝑛
𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
𝑃(1 + ) = 𝑃(1 + )
𝑚 𝑚
(𝑚) (𝑚)
𝑖 𝑖
𝑃(1 + 𝑚 )𝑚𝑡 𝑃(1 + 𝑚 )𝑚𝑡
=
𝑃 𝑃
Divide both sides by P. 𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
(1 + ) = (1 + )
𝑚 𝑚
𝑖 (12) 12𝑡 𝑖 (4) 4𝑡
(1 + ) = (1 + )
12 4
Note: Do not use the value of t in the (12𝑡)
𝑖 (12) 1 0.06 (4𝑡) 1
problem. [(1 + ) ] 𝑡 = [(1 + ) ]𝑡
1 12 4
Raise both sides of the equation with 𝑡
12
Cancel t 𝑖 (12) 0.06 (4)
(1 + ) = (1 + )
12 4
12
Simplify the right side of the equation . 𝑖 (12)
You can directly input it in your (1 + ) = 1.061363551
12
calculator.Divide 0.06 by 4.Add 1 to the
result and raise it to 4.
Notice at the left side of the equation that 12
12 𝑖 (12) 12
it is raised to 12 to get rid of it get the 12th √(1 + ) = √1.061363551
root of the both sides of the equation. 12
The left side of the equation would 𝑖 (12) 12
become 1+ = √1.061363551
12
Subtract 1 on both sides of the equation. 𝑖 (12) 12
1+ − 1 = √1.061363551 − 1
12
𝑖 (12) 12
= √1.061363551 − 1
12
Simplify the right side of the equation . 𝑖 (12) 12
You can directly input it in your = √1.061363551 − 1
12
calculator. 𝑖 (12)
Get the 12th root of 1.061363551 = 0.004975
12
afterwhich subtract 1 from the answer. 𝑗 = 0.004975
𝑖 (𝑚)
Since we recall that 𝑗 = 𝑚
Convert it to percent form by shifting to 𝑗 = 0.004975 = 0.4975%
the right twice and affix the percent sign.
Substitute the given in the formula for the (1 + 𝑗)𝑛 − 1
𝐹=𝑅
future value. 𝑗
(1 + 0.004975)180 − 1
𝐹 = ₱1,000.00
0.004975
You can directly input the values . (1.004975)180 − 1
In the numerator ,add 1 and 0.004975 𝐹 = ₱1,000.00
0.004975
In the numerator , 1.004975 raise it to 𝐹 = ₱290,076.28 will be in the fund after
180 minus 1. 20 years.
The result will be divided by 0.004975.
Multiply the quotient to 1000.

13
PRESENT VALUE OF A GENERAL ANNUITY

ILLUSTRATIVE EXAMPLE:

Process Solution
Identify the given. R= ₱5,400.00
t= 10
m=2 (compounded semi-annually)
𝑖 (𝑚) = 7%
Solve for n. 𝑛 = 𝑚𝑡
n pertains to the number of payments 𝑛 = (4)(10) = 40
thus if we look into the problem do not be For n notice that m is equal to 4 not 2
confused with the value of m. since n pertains to the number of
For this we will be using m=4 since the payments and in the problem it was
payment is to be done quarterly. stated that the annuity will be quarterly
thus the number of payments to be made
after 10 years is 40 payments.
While m=2 is to be used for the
equivalent rates.
Convert 7% percent to decimal form by 7%=0.07
removing the percent sign and move the
decimal point 2 places to the left.
Solve for the equivalent rates. 7% compounded semi-annually to
compounded quarterly.
Substitute the given in the formula. 𝐹1 = 𝐹2
𝐹1 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦; 𝑚 = 4 𝑃(1 + 𝑗)𝑛 = 𝑃(1 + 𝑗)𝑛
𝐹2 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦; 𝑚 = 2 𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
𝑃(1 + ) = 𝑃(1 + )
𝑚 𝑚
𝑖 (𝑚) 𝑖 (𝑚)
𝑃(1 + 𝑚 )𝑚𝑡 𝑃(1 + 𝑚 )𝑚𝑡
=
𝑃 𝑃
𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
Divide both sides by P. (1 + ) = (1 + )
𝑚 𝑚

14
 𝑖 (4) 4𝑡 𝑖 (2) 2𝑡
(1 + ) = (1 + )
4 2
Note: Do not use the value of t in the (4𝑡)
𝑖 (4) 1 0.07 (2𝑡) 1
problem. [(1 + ) ] 𝑡 = [(1 + ) ]𝑡
1 4 2
Raise both sides of the equation with 𝑡
4
Cancel t 𝑖 (4) 0.07 (2)
(1 + ) = (1 + )
4 2
4
Simplify the right side of the equation . 𝑖 (4)
You can directly input it in your (1 + ) = 1.071225
4
calculator.
Divide 0.07 by 2.
Add 1 to the result and raise it to 2.
Notice at the left side of the equation that 4
4 𝑖 (4) 4
it is raised to 4 to get rid of it get the 4th √(1 + ) = √1.071225
root of both sides of the equation. 4
The left side of the equation would 𝑖 (4) 4
become 1+ = √1.071225
4
Subtract 1 on both sides of the equation. 𝑖 (4) 4
1+ − 1 = √1.071225 − 1
4
𝑖 (4) 4
= √1.071225 − 1
4
Simplify the right side of the equation . 𝑖 (4) 4
You can directly input it in your = √1.071225 − 1
4
calculator. 𝑖 (4)
Get the 4th root of 1.071225 afterwhich = 0.017349
4
subtract 1 from the answer. 𝑗 = 0.017349
𝑖 (𝑚)
Since we recall that 𝑗 = 𝑚
Convert it to percent form by shifting to 𝑗 = 0.017349 = 1.7349%
the right twice and affix the percent sign.
Substitute the given in the formula for the 1 − (1 + 𝑗)−𝑛
𝑃 = 𝑅
future value. 𝑗
1 − (1 + 0.017349)−40
𝑃 = ₱5,400.00
0.017349
You can directly input the values . 1 − (1.017349)−40
In the numerator ,add 1 and 0.017349 𝑃 = ₱5,400.00
0.017349
In the numerator , subtract 1.017349 𝑃 = ₱154,826.86 is the present value of
raise to negative 40 from 1. the annuity
The result will be divided by 0.017349.
Multiply the quotient to 5400.
We will be applying our learnings on present and future values to solve cash
flow problems.
Let us define the different terms to be used in this module.
Cash Value or Cash Price is equal to the down payment (f there is any) plus the
present value of the installment payments.
Market Value is the price of an asset offered in public where multiple buyers can make
offers to buy the given asset. Thus, companies are required to show their periodic
financial information to the public when offering securities to the public.
15
Fair Market Value is the price of a given property that the buyer and a seller agreed
upon.
Cash Flow Stream is the incoming and outgoing cash in a business. It is used to
assess the company’s income. The company’s cash flow can either be negative or
positive.
For example : A company in Year 1 has cash in flow of ₱40,000.00 but has a cash
outflow of ₱20,000.00. To get the net cash flow of the company , we deduct the inflow
and outflow to get ₱20,000.00 that indicates the company had a net gain.
Illustrative Example:
Yanry was offered two options in buying a lot. Option A offers ₱50,000.00
downpayment and to pay ₱900,000.00 after 3 years. Option B offers ₱ 50,000.00
downpayment and to pay ₱30,000.00 monthly. Compare the fair market values of the
two offers if the money will earn 3% compounded annually.
Given:
Option A ₱50,000.00 downpayment and to pay
₱900,000.00 after 3 years

Option B ₱ 50,000.00 downpayment and to pay

₱30,000.00 monthly.
Nominal rate: 𝑖 (𝑚) 3%
m=1 Compounded annually
Illustrate the cash flow using time diagram:
Option A:

Option B

Since we started the time at 0 , then we would use the formula for present value.
Solution: Option A
The Present value of ₱900,000 3 years from now

16
Given F= ₱900,000.00
𝑖 (𝑚) = 3%
t= 3
𝑭
Formula: Since we are looking for the 𝑷 = 𝑭(𝟏 + 𝒋)−𝒏 or 𝑷 = (𝟏+𝒋)−𝒏
present value of ₱900,000.00 3 years
from now we will use the formula for
present value for compound interest
Compounded anually m=1
𝑖 (𝑚) 3% 0.03
Solve for j . 𝑗= 𝑗= = = 0.03
𝑚 1 1
Solve for n n=mt
n= (1)(3)= 3
Substitute the given in the formula 𝑷 = 𝑭(𝟏 + 𝒋)−𝒏
𝑃 = ₱900,000.00 (1 + 0.03) −3
Work inside the parenthesis . Add 1 and 𝑃 = ₱900,000.00 (1.03) −3
0.03
Raise 1.03 to negative 3 and multiply it 𝑃 = ₱823,627.49
with ₱900,000.00
Compute for the Fair Market Value FMV= down payment + Present value
𝐹𝑀𝑉 = ₱50,000.00 + ₱823,627.49
𝐹𝑀𝑉 = 873,627.49

Solution : Option B
Given R=₱30,000.00
t= 3 years
₱ 50,000.00 downpayment and to pay Option B involves general annuity since
₱30,000.00 monthly the regular payment which is monthly is
not equivalent to the interest
compounded annually.
Formula for General Annuity 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
𝑗
Convert the equivalent rates 𝐹1 = 𝐹2
3 % Compounded annually to 𝑃(1 + 𝑗)𝑛 = 𝑃(1 + 𝑗)𝑛
compounded monthly 𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
𝐹1 = 𝐹2 (1 + ) = (1 + )
𝑚 𝑚
𝐹1 = compounded monthly 𝑖 (12) 12𝑡 0.03 1𝑡
𝐹2 = 3 % Compounded annually (1 + ) = (1 + )
12 1
𝑖 (12) 12
(1 + ) = (1 + 0.03)1
12
𝑖 (12) 12
(1 + ) = 1.03
12
12 i(12) 12 12
√(1 + ) = √1.03
12
i(12) 12
1+ = √1.03
12
i(12) 12
= √1.03 − 1
12
17
 i(12)
= 0.002466 = 0.2466%
12
j= 0.002466 or 0.2466%
Solve for n n=mt 𝑛 = (12)(3) = 36
Substitute the given in the formula 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
𝑗
1 − (1 + 0.002466)−36
𝑃 = (₱30,000.00)
0.002466
Work inside the parenthesis . Add 1 and 1 − (1.002466)−36
0.002466 and raise it with -36 and 𝑃 = (₱30,000.00)
0.002466
subtract it from 1. Divide the result to 𝑃 = ₱ 1,032,232.05
0.0025 and multiply it with 30,000.
Compute for the Fair Market Value FMV= downpayment + Present Value
FMV = ₱50,000.00 + ₱1,032,232.05
FMV= ₱1,082,232.05
ILLUSTRATIVE EXAMPLE 2:
Mr. Kana purchased a laptop which costs ₱50,000.00. He gave a ₱12,000.00 down
payment and 24 monthly payments. If money is worth 14% compounded monthly,
how much is the monthly payment
Solution:
Given: Cost: ₱50,000.00
Down payment: ₱12,000.00
n= 24 monthly payments
i(𝑚) = 14%
m=12
Formula to be used: Present Value for 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
simple annuity since the monthly 𝑗
payment is equal to the interest
compounded monthly
Unknown: Regular /periodic payment
Manipulate the formula to find R by 1 − (1 + 𝑗)−𝑛
𝑃 𝑅
1−(1+𝑗)−𝑛 𝑗
dividing both sides by −𝑛 =
𝑗 1 − (1 + 𝑗) 1 − (1 + 𝑗)−𝑛
𝑗 𝑗
1−(1+𝑗)−𝑛
Then cancel to get R 𝑃
𝑗 𝑅=
1 − (1 + 𝑗)−𝑛
𝑗
Solve for Present value which is the P= ₱50,000.00-₱12,000.00=₱38,000.00
cost of the laptop minus the
downpayment
𝑖 (𝑚) 0.14
Solve for j. 𝑗= 𝑗= = 0.011667
𝑚 12
Substitute the given in the formula ₱38,000.00
𝑅=
1 − (1 + 0.011667)−24
0.011667
You can directly input it in your ₱38,000
𝑅=
calculator. 1 − (1.011667)−24
Work on the denominator first. 0.011667
18
 Add 1 and 0.011667 and raise it to -24. 𝑅 = ₱1,824.50 is to be paid monthly.
Subtract the result from 1 and divide it
with 0.011667.
Divide ₱38,000.00 with the result above.
Deferred Annuities series of payments, as what we have learned already in the
previous modules on annuities but will start at a later date. Here are some real-life
examples of deferred annuities.
Example: A credit card company offering its clients to purchase today but to start
paying monthly with their choice of term after 3 months. Here the payment will start
after 3 months.
DEFINITION OF TERMS
Deferred Annuity. it is an annuity whose first payment starts at some future time.
Present Value. The Present Value of a deferred annuity is the sum of all the present
values of the periodic payment made after the deferred period.
Period of Deferral. It is also called the deferment period. It is the length of time from
the present until the beginning of the first payment interval. In this period, the
borrower does not need to pay for the principal amount and the interest.

How to compute for the number of deferred payment periods, we can use the
following:
1. If the periodic payment is made on the succeeding year, multiply the deferred
years by m, the number of conversion periods per year.
Example:
The quarterly payment of the annuity is deferred for 5 years.
d= number of deferred periods m=4
Solution: d= (5)(4)=20
The quarterly payment of the annuity is deferred for five years. There are four quarters
in one year, so we will multiply five years by four. Therefore, there are twenty deferred
periods in five years.
2. If the periodic payment is due at the end of the deferment years, multiply the
deferred years by m and subtract 1.
Example: The first quarterly payment of the annuity is due at the end of 3 years.
d= number of deferred periods m=4
Solution: d= [(4)(3)]-1= 12-1=11
The first quarterly payment of the annuity is due at the end of three years. Three years
times four quarters minus one is equal to eleven. Therefore, the number of deferred
periods is eleven.
3. If the periodic payment is due at the end of the deferment years and the last
payment is due at the end of the specified number of years:
 Get the difference between the specified number of years when the last
payment occurs and the number of deferment years.
 Multiply the deferment year by m then subtract 1.
 Multiply the difference by m then add 1.

19
Example:
The first semiannual payment of the annuity is due at the end of 4 years and the last
payment is due at the end of 6 years.
d= number of deferred periods
p= number of payment periods
deferred years: 4 years
difference: 6 − 4 = 2 m=2
Solution:
𝑑 = [(4)(2)] − 1 = 7 periods
𝑝 = [(2)(2)] + 1 = 5 periods

ILLUSTRATIVE EXAMPLE: Find the present value of the deferred annuity of

₱2,000.00 every end of three months for 10 years if it is deferred for 5 years. The
money is worth 15% compounded quarterly.

Process Solution
Given R= ₱2,000.00
t= 10 years
deferred period= 5 years
m= 4 (end of three months)
i(4) = 15%
Solve for k = k= mt
number of k= (4)(5)
artificial k=20
payments.
Multiply the
no. of deferred
years with the
frequency of
conversion.

20
 Solve for n = n=mt
actual number n= (4)(10)
of payments. n=40
Solve for j i(𝑚) 0.15
𝑗= = = 0.0375
𝑚 4
Substitute the 1 − (1 + 𝑗)−(𝑘+𝑛) 1 − (1 + 𝑗)−𝑘
given in the 𝑃=𝑅 −𝑅
𝑗 𝑗
formula for the 1 − (1 + 0.0375)−(20+40) 1 − (1 + 0.0375)−20
Present Value 𝑃 = ₱2,000.00 − ₱2,000.00
0.0375 0.0375
of a deferred
annuity.
Work on the 1 − (1.0375)−60 1 − (1.0375)−20
numerator. 𝑃 = ₱2,000.00 − ₱2,000.00
0.0375 0.0375
−60
Raise 1.0375 1 − (1.0375) 1 − (1.0375)−20
to -60 and 𝑃 = ₱2,000.00 − ₱2,000.00
0.0375 0.0375
subtract the 𝑃 = ₱47,475.83 − ₱27,792.41
result from 1,
then divide it
with 0.0375
and multiply it
with 2,000
minus the
result of
Raising
1.0375 to 20
and subtract
the result from
1, then divide it
with 0.0375
and multiply it
with 2,000.
Subtract the 𝑃 = ₱19,683.42
result to find
the present
value.
2. Emma purchased a Smart TV with monthly payments of ₱1,999.00 monthly for 2
years. The monthly payment will start at the end of three months with 10%
compounded monthly. What is the present value of the deferred annuity?
ILLUSTRATION:

21
Process Solution
Given R= ₱1,999.00
t= 2 years
deferred period= 3 months
m= 12
i(4) = 10%
Identify k. In this problem, we will not use the formula for k since the deferred
period will start at the end of 3 months or at the end of the third
conversion period. Therefore, we have 2 artificial payments.k= 2
Solve for n = n=mt
actual number n= (4)(2)
of payments. n=8
Multiply the
frequency of
conversion
with the time.
Solve for j i(𝑚) 0.10
𝑗= = = 0.008333
𝑚 12
Substitute the 1 − (1 + 𝑗)−(𝑘+𝑛) 1 − (1 + 𝑗)−𝑘
given in the 𝑃 = 𝑅 − 𝑅
𝑗 𝑗
formula for the 1 − (1 + 0.008333)−(2+8) 1 − (1 + 0.008333)−2
Present Value 𝑃 = ₱1,999.00 − ₱1,999.00
0.008333 0.008333
of a deferred
annuity.
Work on the 1 − (1.008333)−10 1 − (1.008333)−2
numerator. 𝑃 = ₱1,999.00 − ₱1,999.00
0.008333 0.008333
Raise 𝑃 = ₱19,103.56 − ₱3,948.58
1.008333 to -
10 and
subtract the
result from 1,
then divide it
with 0.008333
and multiply it
with 1,999
minus the
result of
Raising
1.008333 to -2
and subtract
the result from
1, then divide it
with 1.008333
and multiply it
with 1,999.
Subtract the 𝑃 = ₱15,154.98
result to find The cash price of the appliance is ₱15,154.98.
the present
value.

22
 What’s More
Activity 1
Fill Me with My Solution!
Direction: Answer the following problems by completing its solution.
1. What is the Future Value of an insurance with monthly payments of ₱4,000.00 for
5 years with interest rate of 3% compounded monthly?
Process Solution
Identify the given
Substitute the given in the formula
Work inside the parenthesis first.
Work in the numerator and divide the result with the denominator.
Multiply the result to R. You can directly input the values using a
calculator to have an accurate answer.
2. What is the present value of a house loan with annual payments of ₱95,000 with
interest rate of 9% compounded annually for 6 years?
Process Solution
Identify the given
Substitute the given in the formula
Work inside the parenthesis first.
Work in the numerator and divide the result with the denominator.
Multiply the result to R. You can directly input the values using a
calculator to have an accurate answer.
Assessment 1
Direction: Solve the following problem completely. Identify the process and its
solution.
A car loan with monthly payments of ₱3,000.00 for 5 years with interest rate of 13%
compounded monthly. What is its present and future value?
Activity 2
Complete Me!
Direction: Complete the missing values in the following diagram and solution.
1. Future value of a general annuity.

23
 Process Solution
Identify the given. R= ₱5,000.00
t= 3
m=2 (compounded semi-annually)
𝑖 (𝑚) = 3%
Solve for n.
n pertains to the number of payments
thus if we look into the problem do not be
confused with the value of m.
For this we will be using m=12 since the
payment is to be done monthly.
Convert 3% percent to decimal form by
removing the percent sign and move the
decimal point 2 places to the left.
Solve for the equivalent rates. 3% compounded semi-annually to
compounded monthly.
Substitute the given in the formula. 𝐹1 = 𝐹2
𝐹1 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦; 𝑚 = 12 𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
𝐹2 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑠𝑒𝑚i − annually ; 𝑚 = 2 𝑃(1 + ) = 𝑃(1 + )
𝑚 𝑚
𝑖 (𝑚) 𝑚𝑡 𝑖 (𝑚) 𝑚𝑡
(1 + ) = (1 + )
𝑚 𝑚
Divide both sides by P.
𝑖 (12) 12𝑡 𝑖 (2) 2𝑡
(1 + ) = (1 + )
12 2
Note: Do not use the value of t in the
problem.Raise both sides of the equation
1
with 𝑡
12
Cancel t 𝑖 (12) 0.03 (2)
(1 + ) = (1 + )
12 2
12
Simplify the right side of the equation . 𝑖 (12)
You can directly input it in your (1 + ) = 1.030225
12
calculator.
Divide 0.03 by 2.
Add 1 to the result and raise it to 2.
Notice at the left side of the equation that
it is raised to 12 to get rid of it get the 12th
root of the both sides of the equation.
The left side of the equation would 𝑖 (12) 12
become 1 + = √1.030225
12
Subtract 1 on both sides of the equation.
Simplify the right side of the equation .
You can directly input it in your
calculator.
Get the 12th root of 1.030225 afterwhich
subtract 1 from the answer.
Convert it to percent form by shifting to
the right twice and affix the percent sign.

24
 Substitute the given in the formula for the (1 + 𝑗)𝑛 − 1
𝐹=𝑅
future value. 𝑗
(1 + 0.0024845)36 − 1
𝐹 = ₱5,000.00
0.0024845
You can directly input the values .
In the numerator ,add 1 and 0.004975
In the numerator , 1.0024845 raise it to
36 minus 1.
The result will be divided by 0.0024845.
Multiply the quotient to 5400.

2. Present value of a general annuity.

Process Solution
Identify the given. R= ₱500.00
t= 10
m=12 (compounded monthly)
𝑖 (𝑚) = 5%
Solve for n.
n pertains to the number of payments
thus if we look into the problem do not be
confused with the value of m.
For this we will be using m=2 since the
payment is to be done semi-annually.
Convert 5% percent to decimal form by
removing the percent sign and move the
decimal point 2 places to the left.

Solve for the equivalent rates. 5% compounded monthly to

compounded semi-annually.
Substitute the given in the formula.
𝐹1 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦; 𝑚 = 2
𝐹2 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦; 𝑚 = 12
Note: Do not use the value of t in the (2𝑡)
𝑖2 1 0.05 (12𝑡) 1
problem. [(1 + ) ] 𝑡 = [(1 + ) ]𝑡
1 2 12
Raise both sides of the equation with 𝑡
2
Cancel t 𝑖 (2) 0.05 (12)
(1 + ) = (1 + )
2 12
Simplify the right side of the equation .
You can directly input it in your
calculator.

25
 Divide 0.05 by 12.Add 1 to the result and
raise it to 12.
Notice at the left side of the equation that
it is raised to 2 to get rid of it get the
square root of both sides of the
equation.
The left side of the equation would 𝑖 (2) 2
become 1+ = √1.0511619
2
Subtract 1 on both sides of the equation.
Simplify the right side of the equation .
You can directly input it in your
calculator.
Get the square root of 1.0511619
afterwhich subtract 1 from the answer.
Convert it to percent form by shifting to
the right twice and affix the percent sign.
Substitute the given in the formula for the 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
future value. 𝑗
1 − (1 + 0.025262)−20
𝑃 = ₱500.00
0.025262
You can directly input the values .
In the numerator ,add 1 and 0.25262
In the numerator , subtract 1.025262
raise to negative 20 from 1.
The result will be divided by 0.025262.
Multiply the quotient to 500.
Assessment 2
Solve the following problem on the present and Future Value of a general annuity.
Annual payments of ₱1,500.00 at the end of each term for 8 years with interest rate
of 6% compounded quarterly. Find the present and future value of the annuity.

Activity 3
Fill In my incompleteness!
Complete the missing values in the following diagram and solution of the fair market
value of the following problem.
1. The buyer of a lot pays ₱50,000.00 cash and to pay ₱10,000.00 monthly for 10
years. If the money is 8% compounded monthly, what is the cash price or fair market
value of the lot?
Solution:
Given: Paid: ₱50,000.00
Regular Payment: ₱10,000.00
i(𝑚) = 8%
m=12
t=10
Solve for n

26
 Formula to be used: Present Value for 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
simple annuity since the monthly 𝑗
payment is equal to the interest
compounded monthly
Unknown: Fair market value
𝑖 (𝑚) 0.08
Solve for j. 𝑗= 𝑗= = 0.006667
𝑚 12
Substitute the given in the formula 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
𝑗
You can directly input it in your
calculator. Work on the numerator first.
Compute for the Fair Market Value FMV=down payment + present value
FMV= ₱

2. Solve the following problems completely. Identify its solution. A loan is to be

repaid quarterly for 5 years that will start at the end of 2 years. If interest rate is 6%
compounded quarterly, how much is the loan if the quarterly payment is ₱10,000.00?
Process Solution
Given R= ₱10,000.00
t= 5 years
deferred period= 2 years
m= 4
i(4) = 6%
Solve for k = k= mt
number of artificial
payments. Multiply
the no. of deferred
years with the
frequency of
conversion.
Solve for n = actual n=mt
number of
payments. Multiply
the frequency of
conversion with the
time.
Solve for j i(𝑚)
𝑗= =
𝑚
Substitute the 1 − (1 + 𝑗)−(𝑘+𝑛) 1 − (1 + 𝑗)−𝑘
given in the 𝑃=𝑅 −𝑅
𝑗 𝑗
formula for the 𝑃=
Present Value of a
deferred annuity.
Work on the 1 − (1.015)−(28) 1 − (1.015)−8
numerator. 𝑃 = 10,000 − 10,000
0.015 0.015
Manipulate the 𝑃=
expression by
applying PEMDAS
Subtract the result. 𝑃=₱

27
Assessment 3
Fill in My Solution!
1. The buyer of a farm pays ₱10,000.00 monthly for 10 years. What is the fair market
value of the farm if the money is 5% compounded annually?
Process Solution
Given
This involves general annuity since the regular payment which is
monthly is not equivalent to the interest compounded annually.
Formula for General Annuity
Convert the equivalent rates.5 % Compounded annually to compounded
monthly. 𝐹1 = 𝐹2
𝐹1 = compounded monthly
𝐹2 = 5 % Compounded annually
Solve for n
Substitute the given in the formula
Work in the numerator first . And then divide and multiply the result to
₱10,000.00
The Fair Market Value is the same as the present value since there is no
down payment.

2. A car is to be purchased in monthly payments of ₱17,000.00 for 4 years starting at

the end of 4th month. How much is the present value of the car if the interest rate
used is 12% compounded monthly?
Process Solution
Given
Identify k
Solve for n = actual number of payments. Multiply the frequency of
conversion with the time.
Solve for j
Substitute the given in the formula for the Present Value of a deferred
annuity.
Work on the numerator.
Manipulate the expression by applying PEMDAS
Subtract the result.

What I Have Learned

A. For Nos. 1-3, fill in the blanks of the following statements to complete the
concepts that you have learned.
1. Simple Annuity is an annuity where the ___ or ___ is equal to or the same as the
_ ______.
2. FUTURE VALUE of an ANNUITY (F) is the ____ of all the ______ at the end of the
term. It tells us how much the accumulated ending balance is.
3. PRESENT VALUE OF a SIMPLE ANNUITY is the____ of all the present values of
the______ at the ________ of the term. It gives us the time value of money at the
present market interest rates.
4. Identify the underlined given in the problem:

28
What is the present value of ₱1,230.00 due at the end of every three months for 3
years and 6 months, if money is worth 9% compounded quarterly?
For B & C Using the problem below, answer the following :
B. An appliance is being paid every three months at ₱1,230.00 for 3 years and 6
months, if the money is worth 9% compounded quarterly what is its fair market value?
1. Illustrate its cash flow and describe it in 2 to 3 sentences.
2. How do we compute for its fair market value?
C. A loan of ₱30,000.00 is to be repaid monthly for 5 years that will start at the end of
4 years. If the interest rate is 12% converted monthly, how much is the monthly
payment?
1. The type of annuity illustrated in the problem is a _________.
2. The total number of payments is ________.
3. The number of conversion periods in the period of deferral is _______
4. The interest rate per period is___________.
5. The present value of the loan is __________.
.
What I Can Do
Annuities in My life!
Direction: Describe an example of an annuity in your community.
For example:
a. If your parents tried to purchase an appliance that is paid through installment. How
much is the regular payment, the term of payment, the future value of the appliance.
b. If someone tried to borrow money from you, what are the terms involved like regular
payment, the term of payment, the future value of the borrowed money. (Assign values
for you to solve the future value of the borrowed money).
Post Test

Direction: Answer the following questions by choosing the letter that corresponds to
the correct answer. Show your complete solution on a separate sheet of paper.
1. What is the future value of Annual payments of ₱100,000.00 with interest rate of
8% compounded annually for 15 years?
A.₱1,437,889.62 B.₱855,947.87 C. ₱2,715,211.39 D. ₱1,557,324.91
2. Pedro is paying ₱1,500.00 every 3 months for the amount he borrowed at an
interest rate of 9% compounded quarterly. How much did he borrow if he agreed that
the loan will be paid in 2 years and 6 months?
A.₱10,246.56 B.₱12,107.46 C. ₱10,621.93 D. ₱31,735.75
3. Monthly payments of ₱3,000.00 for 5 years with interest rate of 13% compounded
monthly. What is the total number of payments (n)?
A.₱3,000.00 B.5 C. 13% D. 60
4. Semi-annual payments of ₱21,500.00 with interest rate of 7.5% compounded
semi-annually for 3 years. What is the interest rate per period (j)?
A.₱21,500.00 B.7.5% C. 3.75% D. 3
5. Given the following problem: Find the amount of annuity of ₱50,000.00 payable
semi-annually for 5 years if money is worth 3% compounded quarterly. What is the
equivalent rate?
A. 1.03% B. 3.03% C. 1.51% D. 2%
6. What is the present value of a general annuity of ₱5,400.00 per quarter for 5 years
if the money is worth 6% compounded semi-annually?
A. 1.49% B. 6.09% C. 5.61% D. 2.3%

29
7. What is the number of payments of quarterly payments of ₱3,000.00 at the end of
each term for 7 years with interest rate of 9% compounded annually?
A. 28 B. 20 C. 7 D. 21
8. What is the value of j of quarterly payments of ₱3,000.00 at the end of each term
for 7 years with interest rate of 9% compounded annually?
A. 0.9% B. 90% C. 9% D. 0.09%
9. Mr. Zen purchased a Dryer which costs ₱ 50,000.00. He gave a ₱12,000.00 down
payment and 24 monthly payments. If money is worth 11% compounded monthly,
how much is the monthly payment?
A.₱4,551.91 B.₱2,330.40 C. ₱1,771.10 D. ₱3,450.23
For nos. 10-11. Use the given problem,
Mr. Zen purchased a Dryer which costs ₱ 50,000.00. He gave a ₱12,000.00 down
payment and 24 monthly payments. If money is worth 11% compounded monthly,
how much is the monthly payment? What is the fair market value?
10. What is the value of j if the money is 11% compounded monthly?
A. 0.009167 B. 0.11 C. 0.055 D. 0.004583
11. 11%
A. interest rate per payment interval C. nominal rate
B. interest rate per period D. present value
12. Find the present value of a ₱3,000.00 deferred annuity paid every six months for
8 years if the first payment is made at the end of 2 years and the money is worth
16% compounded semi-annually.
A. ₱19, 518.06 B. ₱20,514.21 C. ₱21,079.51 D. ₱24,654.00
13. Find the present value of a ₱10,000.00 deferred annuity that is paid every 3
months if the first payment is due at the end of 2 years and the last at the end of 10
years. The money is worth 15% compounded quarterly.
A. ₱160,532.28 B. ₱159,524.21 C. ₱146,524.20 D. ₱144,930.90
14. Find the present value of an annuity if the first quarterly payment of ₱2,000.00 is
due at the end of 6 years and the last at the end of 12 years. The money is worth
18% compounded quarterly.
A. ₱12,514.21 B. ₱14,280.60 C. ₱10,775.66 D. ₱10,080.25
15. Find the present value of a ₱6,800 deferred annuity that is paid every three
months for 12 years if the first payment is made at the end of 2 years and the money
is worth 17.5% compounded semi-annually.
A. ₱100,426.57 B. ₱96,217.07 C. ₱87,141.14 D. ₱94,401.42

30
 Additional Activity
REBUS PUZZLE!
What is the title?

TO FIND THE TITLE OF THE PICTURE: Solve the

problems below. Each time the answer appears, write
the letters of the exercise above it. Show your complete
solution on a separate sheet of paper.

AROUND. What is the HOUSE. A student had a

future value of a house loan study loan with annual
being paid ₱20,000.00 payments of ₱600.00 for 20
monthly for 5 years with 10% years that will start 10 years
from now with 7% converted
interest compounded semi-
annually. How much is the
annually?
study Loan?

THE. How much is the cash LOUNGING Ana wants to

price of a car if the buyer pays
₱189,000.00 cash and save for her retirement and
₱15,000.00 monthly for 5 wants to save ₱2,000.00 every
years if the money is 8% 3 months with an interest of
compounded annually? 9% compounded quarterly for
10 years. What is the future
value of her savings?

₱127,572.35 ₱ 3,981,234.23 ₱933,674.19 ₱3,457.46

31
 Answer Key
Pretest What’s in What’s More: Act 1

What’s New
Assessment 1

What’s More: Act 2: No.1

What’s More: Act 1

What’s More: Act 2: Number 2

32
What’s More: Act 2: Number 2 What’s More: Assessment 3: Number 1

Assessment 2
F= ₱14,919.06
P= ₱9, 254.63

What’s More Act 3: Number 1

What’s More: Assessment 3: Number 2

What’s More Act 3: Number 2

33
What I Have Learned

What I Can Do
Post test

Additional Activity

Lounging around the house

34
 References

1. PRESIDENTIAL DECREE No. 49 November 14, 1972. Decree on the

Protection of Intellectual Property. (Sec.9)
2. Oronce, Orlando A. 2016. General Mathematics.Sampaloc, Manila: Rex Book
Store, Inc.
3. Bacani, Jerico B. and Jeffrey M. Soriano. 2017. Business Mathematics.
Quezon City: C & E Publishing, Inc.
4. Verzosa, Debbie Marie B., Paolo L. Apolinario, Regina M. Tresvalles, Francis
Nelson M. Infante, Jose Lorenzo M. Sin and Len Patrick Dominic M.
Garces.2016. General Mathematics Learner’s Material. Pasig City: Department
of Education.
5. Rosales, Jefrey. Lesson Plan for Annuities. Accessed from
https://www.academia.edu/27691531/Lesson_Plan_For_Annuities
6. Unit 9: Mathematics of Investment Lesson 5: General Annuities and Equivalent
Rates. Accessed from
http://www.maxonlinemath.com/math12/jdinvx/genann.htm
7. Your Guide to Annuities: An Introduction. April 11, 2016. Accessed from
https://www.finra.org/investors/insights/your-guide-annuities-
introduction#:~:text=At%20its%20core%2C%20an%20annuity,or%20at%20so
me%20future%20time.&text=Some%20annuity%20contracts%20provide%20
a,a%20stream%20of%20retirement%20income.
8. Illustrating Simple and General Annuities. Accessed from
http://www.starbooks.ph
9. Annuities. Copyright 2017 Math is Fun. Accessed from
https://www.mathsisfun.com/money/annuities.html
10. Friedman, Erich .Rebus Puzzles. 2008. Accessed from
https://www.pinterest.com/pin/179932947600285482/
11. . Images taken from
https://www.google.com/search?q=weighing+scale+justice+symbol&tbm
https://www.google.com/search?q=percentage+icon&tbm=isch&ved=2ahUKE
wjcvu205f7rAhWi
https://www.google.com/search?q=giving+MONEY+hands+icon&tbm=isch&ve
d=2ahUKEwiFmci
www.starbooks.com

35
For inquiries or feedback, please write of call:
Department of Education-Schools Division of CAR
(Office Address, Wangal, LTB)
Telefax:442-6570 or 422-2001
Email Address: [email protected]

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