Holy Rosary College of Santa Rosa Laguna, Inc.

Tagapo, City of Santa Rosa, Laguna

LEARNING MODULE
School Year 2020-2021

General Mathematics
Grade 11
nd
2 Quarter, Week 5-6
Mark Alexis K. Ferrer
mark.ferrer@hrcsrl.edu.ph

Chapter 4 Math of Investment

Lesson 3 Simple Annuity
Lesson Description:
This module will help you learn the different types of functions and their corresponding
graphical representations. You will also learn the applications of these functions to real life;
some of which can be linked with other fields such as in business, medicine, sciences and others.
You will also learn that a certain function is unique to a specific situation. Functions will also
allow us to visualize existing between two variables. Also, we will investigate, analyze,
and solve problems involving simple and compound interests, simple and general annuities,
stocks and bonds, loans and amortization, and using appropriate business and financial
instruments.
Lesson Objectives:
At the end of the lesson, the student must be able to
1. Define annuity payment.
2. Identify different types of annuity
3. Find the future and present value of simple annuity.

Review and Prerequisite Activity

Answer each of the following:

1. P 50, 000 is invested for 5 years at 8% compounded quarterly. Give the value of each
r
variable in the formula A=P(1+i)n where i= and n=Kt
K
a. P = P 50,000
b. r = 0.08
c. i = 0.02
d. n = 20
2. If P10,000 is invested for 10 years at 6% compounded semi-annually, the final amount
is P 18, 061.11. Give the value of the following
a. P = P 10,000
b. r = 0.06
c. i = 0.03
d. n = 20
e. A = 18,061.11

Introduction
If the payment for each period is fixed, and the compound interest rate is fixed over a
specified time, the payment is called Annuity Payment. Accounts associated with streams of
annuity payment are called annuities. Each payment in an annuity is called the Periodic
Payment. The time between the succesive payments date of an annuity is called the Payment
Interval. The interval between the beginning of the first payment period and the end of last
payment period is called the Term of the Annuity.

HRC General Mathematics, Grade 11, Second Quarter Page 1 of 5

 Holy Rosary College of Santa Rosa Laguna, Inc.
Tagapo, City of Santa Rosa, Laguna

LEARNING MODULE
School Year 2020-2021

The following are examples of annuities:

1. Rent payment
2. Investment/Insurance
3. Pension
4. Monthly payment of car loan or mortgage.
5. Credit card payment

The flowchart below gives the different kinds of annuities.

Annuity

Simple General
Annuity Annuity

Ordinary Deferred
Annuity Annuity

Mr. and Ms. Ferrer deposits P 20, 000 at the end of each year for 5 years in an investment
account that earns 10% per year compounded annually, what is the amount of annuity?

We can use a table to organize the calculations.

Period Payment per Period Amount at 5 years

1 P 20, 000
2 P 20, 000
3 P 20, 000
4 P 20, 000
5 P 20, 000
Total
P 20, 000
20,000(1+0.1)4 or P 29, 282
20,000(1+0.1)3 or P 26, 620
20,000(1+0.1)2 or P 24, 200
20,000(1+0.1)1 or P 22, 200
P 122, 102

The Future Value of an annuity is the total accumulations of the payments and
interest earned.
The Present Value of an annuity is the principal that must be invested today to
provide the regular payments of an annuity.
The term future value that has been used with compound interest means the
same term as used with annuity: Future value comes at the end.
Annuity is a fixed sum of money paid to someone at regular intervals, subject
to fixed compound interest.

HRC General Mathematics, Grade 11, Second Quarter Page 2 of 5

 Holy Rosary College of Santa Rosa Laguna, Inc.
Tagapo, City of Santa Rosa, Laguna

LEARNING MODULE
School Year 2020-2021

Future Value of Simple Ordinary Annuity Present Value of Simple Ordinary Annuity

FV =P ¿ PV =P ¿

Where
FV = Future Value
PV = Present Value
P = Periodic Payment
i = interest per period
r
i=
K
n = number of conversion period
n = tK

Example
1. Mr. and Ms. Ferrer deposits P 20, 000 at the end of each year for 5 years in an
investment account that earns 10% per year compounded annually, what is the amount of
annuity?
Solution
we have P = P 20,000, i = r/K = 0.1/1 = 0.1, and n = tK = 5(1) = 5, thus,
FV =P ¿
FV =20,000 ¿
2. If you pay P 50 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?
Solution
we have P = P 50, i = r/K = 0.1/12 , and n = tK = 40(12) = 480, thus,
FV =P ¿
FV =50 ¿
3. Aaron’s mother saved P 5, 000 at the end of every 6 months in an educational plan that earns
6% per year compounded semi-annually. What is the amount at the end of 18 years?

Solution
we have P = P 5,000, i = r/K = 0.06/2 = 0.03, and n = tK = 18(2) = 36, thus,
FV =P ¿
FV =5,000 ¿
4. Fernan borrows money to buy a motorcycle. He will repay the loan by making montly
payments of P 1,500 per month for the next 2 years at an interest rate of 9% per year
compounded monthly. How much did Fernan borrows?

HRC General Mathematics, Grade 11, Second Quarter Page 3 of 5

 Holy Rosary College of Santa Rosa Laguna, Inc.
Tagapo, City of Santa Rosa, Laguna

LEARNING MODULE
School Year 2020-2021

Solution
we have P = P 1,500, i = r/K = 0.09/12 = 0.0075, and n = tK = 2(12) = 24, thus,
1−(1+i)−n
PV =P [ i ]
1−( 1+ 0.0075)−24
PV =1,500 [ 0.0075 ]
=P32 , 833.72

Regular Payment (P) of an Annuity Regular Payment (P) of an Annuity

(for Future Value) (for Present Value)

( FV ) i ( PV ) i
P= P=
(1+i)n−1 1−(1+i)−n

Where
FV = Future Value
PV = Present Value
P = Periodic Payment
i = interest per period
r
i=
K
n = number of conversion period
n = tK

5. Eva obtained a loan of P 50,000 for the tuition fee of her son. She has to repay the loan by
equal payments at the end of every six months for 3 years at 10% interest compounded semi-
annually. Find the periodic payment.
Solution:
PV = 50, 000 r = .10
t = 3 years i = .10/2 = 0.05
K=2
n = 3(2) = 6
( 50,000 ) ( 0.05 )
P=
1−( 1+0.05 )−6
P=9 ,850.87

6. Mary borrows P 500, 000 to buy a car. She has two options to repay her loan. the interest is
compounded monthly.
Option 1: 24 monthly payments every end of the month at 12% per year.

HRC General Mathematics, Grade 11, Second Quarter Page 4 of 5

 Holy Rosary College of Santa Rosa Laguna, Inc.
Tagapo, City of Santa Rosa, Laguna

LEARNING MODULE
School Year 2020-2021

Option 2: 60 monthly payments every end of the month at 15% per year.

Solution:
For option 1:
PV = P 500, 000
i = r/K = .12/12 = 0.01
n = tK = 2(12) = 24
( 500,000 ) ( 0.01 )
P= =P23 , 536.74
1− (1+0.01 )−24

For option 2:
PV = P 500, 000
i = r/K = .15/12 = 0.0125
n = tK = 5(12) = 60
( 500,000 ) ( 0.0125 )
P= =P11 ,894.97
1− (1+ 0.0125 )−60

Application

Answer Vocabulary and concepts, Practice and Application I to II page 227 of your book
General Mathematics. Write your answers on Class Notebook – Exercises. You may also attach a
picture of your work on the indicated page of Class Notebook.

HRC General Mathematics, Grade 11, Second Quarter Page 5 of 5