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Simple-annuity (1)

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Irish Jade Magtangob
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9 views17 pages

Simple-annuity (1)

Uploaded by

Irish Jade Magtangob
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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SIMPLE ANNUITY

OBJECTIVE

•To solve for the Future Value


and Present Value of
Simple Ordinary Annuity
and Simple Annuity Due.
SIMPLE ANNUITY

•In this type of annuity, the


interest conversion period
is equal or the same as the
payment interval.
CLASSIFICATIONS OF SIMPLE ANNUITY

• Ordinary annuity is an annuity in which the


periodic payment is made at the end of each
payment interval.
• Annuity due is an annuity in which the periodic
payment is made at the beginning of each
payment interval.
• Deferred annuity is an annuity in which the
periodic payment is not made at the beginning nor
at the end of each payment interval, but some
date later.
SIMPLE ANNUITY

• Simple Ordinary Annuity


FV= PV=

• Simple Annuity Due


FV=( PV= (
EXAMPLE

• 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?
Given: P=50 r=10% m=12 t=40
FV =
FV = 50
FV = Php316,203.98
EXAMPLE

• Ferman borrows money to buy a motorcycle. He will repay


the loan by monthly payments of Php1,500 at the end of
each month for the next 24 months of the interest rate 9%
per year compounded monthly. How much did Ferman
borrow?
Given: P=1,500 r=9% m=12 t=2
PV=
PV=
PV = Php32,833.72
EXAMPLE

• Suppose Mr. and Mrs. Mariano deposited Php20,000 at


the beginning of each year for 5years in an investment
that earns 10% per year compounded annually, how
much will be the investment after 5 years?
Given: P=20,000 r=10% m=1 t=5
FV=(
FV=20,000(
FV=Php134,312.20
EXAMPLE

• Kath borrowed money for the renovation of her house and


repays by making yearly payments of Php70,000 at the
beginning of each year for a period of 8 years at an
interest rate of 10% compounded annually. How much did
Kath borrow?
Given: P=70,000 r=10% m=1 t=8
PV= (
PV= (
PV=Php410,789.32
EXAMPLE

1.Find the future value and present value of an


annuity of P1,500 at the end of every 6
months payable for 2 years if money is worth
10% compounded semi-annually.
2.Find the present value and future value of an
PhP8,000 payable at the beginning of every 3
months for 10 years if money is worth 8%
converted quarterly.
ACTIVITY

1.Find the future value and present value of an


annuity of P900 at the end of every 3 months
payable for 4 years if money is worth 12%
compounded quarterly.
2.Find the present value and future value of an
PhP550 payable at the beginning of each year
months for 15 years if money is worth 15%
converted annually.
DEFERRED ANNUITY
DEFERRED ANNUITY

A deferred Annuity is an annuity that


delays the start of payments until the
agreed upon date. The length of time
between the release of the loan and the
first payment is called the period of
deferment.
FUTURE AND PRESENT VALUE OF A DEFERRED
ANNUITY
• PRESENT VALUE OF A DEFERRED ANNUITY

PV = P( -

• FUTURE VALUE OF A DEFERRED ANNUITY

FV = P
Where: PV – Present Value t – time
FV – Future Vale d – number of deferred
payments
P – periodic payment r – rate
m – number of compounding periods per year
EXAMPLE

1. Kha loaned an amount for the tuition of her daughter. She


agreed to pay Php1,500 every month for 2 years at 3%
interest compounding monthly. If her first payment is deferred
for 3 months, how much was the present value and future
value?
Given: P = 1,500 r = 3% m = 12 t = 2d = 3

Solution: PV = P( -
PV = 1,500( -
PV = Php 34,638.53
EXAMPLE

2. Ava saves Php 1,000 every month at an account that earns


7.2% interest compounding monthly. If she will start saving at
the end of 6 months, how much will be in her account in 8
years?
Given: P = 1,000 r = 7.2% m = 12 t=8

Solution: FV = P
FV = 1,000
Fv = Php 129,308.24
EXAMPLE

3. Marianne loaned an amount to buy a new TV. She agreed


to pay Php 5,750 every quarter for a year at 4% interest
compounding quarterly. If her first payment is due at the
end of 9 months, how much was the cash price of the TV?
4. Kieshan loaned an amount to buy a refrigerator. She
agreed to repay the loan by making 6 semi-annual
payments of Php 6,250 each at 6% interest compounding
semi-annually. If her first payment is deferred for a year,
how much was the cash price of the refrigerator?
5. Audrey loaned an amount to buy a gift for her mom. She
agreed to pay Php 350 every month for 6 months at 2%
compounding monthly. If her first payment is due at the end

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