Worksheet on Annuities

1. Find the accumulated value of the following annuities

A. ₱2 000 deposited every year for 5 years at 9% per year compounded annually.
B. ₱3 500 deposited every 6 months for 10 years at 8% per year compounded semi-annually.
C. ₱10 000 deposited every quarter for 12 years at 6% per year compounded quarterly.

2. Consider the following annuities:

A. Monthly deposit of ₱2 000 at 7% p.a. compounded monthly for 20 years.
B. Monthly deposit of ₱4 000 at 7% p.a. compounded monthly for 10 years.

Find the total deposit and the accumulated value of each annuity. Explain why the amount of
accumulated values are not the same even if the total deposits are the same.

3. Consider the following annuities:

A. Monthly deposit of ₱1 000 at 8% p.a. compounded monthly for 5 years.
B. Quarterly deposit of ₱3 000 at 8% p.a. compounded quarterly for 5 years.

Find the total deposit and the accumulated value of each annuity. Explain why the amount of
accumulated values are not the same even if the total deposits are the same.

4. Find the present value of an annuity which pays ₱500 at the end of each half-year for 20 years if the rate
of interest is 9% compounded semi-annually.

5. If a college freshman invests a $10 000 at 8% p.a. compounded quarterly, how much can be withdrawn at
the end of every quarter to use up the fund exactly at the end of four years of college?

6. A family wishes to accumulate ₱50 000 in a college education fund at the end of 20 years. If they deposit
₱1 000 in the fund at the end of each of the first 10 years and ₱1 000 + X in the fund at the end of each
of the second 10 years, find X if the fund earns 7% effective.

7. The cash price of an automobile is $10 000. The buyer is willing to finance at 18% convertible monthly
and to make payments of $250 at the end of each month for four years. Find the down payment that will
be necessary.

8. Mike borrows ₱200 000 for 8 years and repays the loan with level annual payments at the end of each
year. John also borrows ₱200 000 for 8 years, but pays only interest as it is due each year and plans to
repay the entire loan at the end of the 8-year period. Both loans carry an effective interest rate of 8.5%.
Who paid more interest?

9. Cecille is saving for a laptop. She deposits ₱2 000 at the end of each month into an account that earns
5% per year compounded monthly. Find the amount in the account after 1.5 years.

10. Adora is preparing for an income fund for her retirement. She wants to receive ₱15 000 monthly for the
next 25 years starting 1 month from now. The income fund pays 10.5% per year compounded monthly.
How much must Adora deposit now to pay for the annuity?

11. As a reward, Teddy receives this offer where he has to choose from one of these payment plans.

c. a single cash payment of ₱320 000 to be receive immediately, or

d. monthly reward payment of ₱4 800 for 10 years.

If the money can be invested at 6% per year compounded monthly, which offer would you think Teddy
should accept?

12. Rick borrows ₱20 000 from a cooperative to buy a smartphone. He will repay the loan with equal
payments over 1.5 years at the end of each month. If he is charged 10% interest compounded monthly,
how much is Rick’s monthly payment?
13. Find the present value of payments of $200 every six months starting immediately and continuing
through four years from the present, and $100 every six months thereafter though ten years from the
present if the effective interest rate convertible semi-annually is 6%.

14. Ana gets a loan of ₱80 000 to start her small business. She will repay the loan with equal monthly
payments at the beginning of each month over 3 years at 8% p.a. compounded monthly. How much is
Ana’s monthly payment? What is the total amount that Ana repays?

15. Cesar wants to have ₱50 000 in 4 years by saving equal regular deposits. He can make a deposit at the
end of each month in account that earns 8.5% p.a. compounded monthly. How much must he deposit to
achieve his goal?

16. Owen and Rina each plans to save ₱1 500 000 for their retirement in 30 years.
a. Owen starts his regular deposits immediately. How much must he deposit at the end of each year at
10% p.a. compounded annually to achieve his goal?
b. Rina waits 10 years before she starts her regular savings. How much must she deposit at the end of
each year at 12% p.a. compounded annually to achieve her goal?
c. Compare Owen’s and Rina’s total deposit.

17. An employee aged 40 wishes to accumulate a fund for retirement by depositing $3 000 at the beginning
of each year for 25 years. Starting at age 65 the employee plans to make 15 annual withdrawals at the
beginning of each year. Assuming that all payments are certain to be made, find the amount of each
withdrawal starting at age 65, if the effective rate of interest is 8% during the first 25 years but only 7%
thereafter.

References:
Kellison, Stephen G. The theory of interest. Boston: McGraw-Hill Irwin, 2009.
Oronce, Orlando A. General Mathematics. Manila: Rex Book Store, Inc, 2016.