Annuity Due

Amount and Present Value

(1+i )n +1−1
¿
S =R
i [ −1 ]
1−( 1+i )1−n
A =R¿
i [ +1 ]
Example: Find the present value and the amount of the annuity due with P500 payable quarterly for
9.25 years. Money is worth 10% compounded quarterly.

(1+ 0.025 )38−1

S¿ =500 [ 0.025 ]
−1 =30,613.65

−36
1−( 1+0.025 )
A¿ =500 [ 0.025 ]
+1 =12,278.12

Exercises:
1. A movie camera can be purchased on 24 monthly payments of P2,500 each. The first payment
is due on the day of the purchase. Find the equivalent cash price if money is worth 25%
compounded monthly.
2. Jun invests P1,500 every beginning of each three months. He makes his first deposit on October
5, 2001. How much will be in the fund on October 5, 2010 if interest rate is 12% compounded
quarterly?

Periodic Payment
R ¿
S (i )
s∗¿= n+ 1
¿
( 1 +i ) −1−i

R ¿
A (i )
A∗¿= 1−n
¿
1− ( 1 +i ) +i

What sum should be invested at the beginning of each quarter at 18% compounded quarterly in order to
have P45,000 in a fund 6 years from now?
R ❑
45,000 ( 0.045 )
s∗¿= 25
=1,032.93 ¿
( 1 +0.045 ) −1−0.045

A P26,500 debt bears interest at 23% compounded semiannually. It is to be repaid in installments at the
beginning of every 6 months for 5 years and 6 months. Find the semiannual payment.
R ❑
26,500 ( 0.115 )
A∗¿= −10
=3,915.62 ¿
1− ( 1 +0.115 ) +0.115

Exercises:
1. A computer set worth P40,000 is purchased for P15,000 followed by equal monthly payments
for 12 months. If interest is charged at 20% compounded monthly, what will be the payment
every beginning of each month?
2. What deposit should be made every beginning of each month in an investment house that pays
15% compounded monthly in order to have P100,000 at the end of 10 years?