# ANNUITIES An annuity is a series of equal payments occurring at equal periods of time  Ordinary annuity o Payments are made at the

end of each period [ [ ] ]

Ex. a.What are the present worth and the accumulated amount of a 10 year annuity paying 10,000 at the end of each year with interest as 15% compounded annually? Ans. F = 203, 037 b. A chemical engineer wishes to set –up a special fund by making a uniform semiannual end- of period deposits for 20 years. The fund is to provide a 100,000 at the end of each of the last five years of a 20 year period. If interest is 8% compounded semiannually, what is the required semi-annual deposit to be made? Ans. A = 6,193.99  Deferred annuity o The first payment is made several periods after the beginning of the annuity [ Ex. a. If 10,000 is deposited each year for 9 years, how much annuity can a person get annually from the bank for 8 years starting 1 year after the 9th deposit is made. Cost of money is 14% Ans. A = 34, 675 b. A debt of 40,000 whose interest rate is 15% compounded semi-annually, is to be discharged by a series of 10 semi-annual payment, the first payment is to be made 6 months after consummation of the loan. The first 6 payemnts will be 6,000 each while the remaining 4 payments will be equal and of such amount that the final payment will liquidate the debt. What is the amount of the last 4 payments? Ans. A = 5454 ]

PERPETUITY An annuity in which the payments continue indefinitely

000 for the next 6 years and 50. Find the semi-annual payment and construct an amortization schedule. the first due in 6 months.Ex.500. Ans.000 and the difference between successive payments was to be 400.000 at the end of each year for 6 years.000 at the end of each year for the first 6 years and then 120. usually by a series of equal payments at equal interval of time.5000. Ex. 6.016. A loan was to be amortized by a group of four end of year payments forming an ascending arithmetic progression. 100. only maintenance and or operation every period Capitalized cost = first cost + present worth of perpetual operation and or maintenance Ex. A debt of 5. But the loan was . 241. Determine the capitalized cost of a structure that requires an initial investment of 1.753.650 AMORTIZATION  Any method of repaying debt.000.000 with interest of 12% compounded semi-annually is to be amortized by equal semi-annual payments over the next 3 years.82 UNIFORM ARITHMETIC GRADIENT  Maintenance and repair expenses on specific equipment of property may increase by a relatively constant amount each period. 40. What amount of money invested today at 15% interest can provide the following scholarships.000 each year thereafter for operating expenses. A = 1. 2. the principal and the interest included. operation and maintenance for a long time of forever.277.000 every 5 years for replacement of equipment with interest at 12% per annum? Ans.000 and an annual maintenance of 150. Determine the capitalized cost of each research laboratory which requires 5M for original construction. Interest is 15% Ans. no maintenance and or operation Capitalized cost = first cost + present worth of perpetual replacement Ex. The initial payment was to be 5.000 Case 2: replacement only. P = Pa + Pg Ex.000 thereafter? Ans. and 500. Case 1: no replacement. CAPITALIZED COST  One of the important applications of perpetuity  The sum of the first cost and the present worth of all costs of replacement. 30.

5530.51 . If the interest rate of the loan was 15%.renegotiated to provide for the payment of equal rather tha uniformly varying sums. what was the annual payment? Ans.