1

THE COPPERBELT UNIVERSITY

SCHOOL OF BUSSINESS
BS/BF/BSP/BEC/HRM/BIS 140 Mathematical Analysis
-
ACADEMIC YEAR 2020 - 2021
WORKSHEET SEVEN

FINANCIAL MATHEMATICS
Annuities
EXAMPLE ONE
1
Find the present value of an annuity of K500 per month for 3 years at an
2
interest rate of 28% compounded monthly.
EXAMPLE TWO
A savings and loans offers the two accounts shown in the table. Find the
effective rates
Annual rate Compounding Effective rate
Now account 7.2% Quarterly
Money market 6.9% monthly

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021

 2

EXAMPLE THREE
Given an interest rate of 5% compounded annually, find the present value
of the following annuity: K2 000 due at the end of each year for 3 years,
and K5 000 due thereafter at the end of each year for 4 years.
EXAMPLE FOUR
If K10 000 is used to purchase an annuity consisting of equal payments at
the end of each year for the next 4 years and the interest rate is 6%
compounded annually. Find the amount of each payment.

EXAMPLE FIVE
The premiums on an insurance policy are K175 a quarter, payable at the
beginning of each quarter. If the policyholder wishes to pay 1 years
premium in advance, how much should be paid provided that the interest
rate is 5% compounded quarterly.
EXAMPLE SIX
Find the amount of an annuity consisting of payments K175 at the end of
every 3 months for three years at the rate of 21% compounded quarterly.
Also find the compound interest.
EXAMPLE SEVEN
At the beginning of each quarter, K175 is deposited into a savings account
that pays 21% compounded quarterly. Find the balance in the account at
the end of 3 years.

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021

 3

EXAMPLE EIGHT
A city has a debt of K 1 000 000 due in 15 years. How much money must it
deposit at the end of each half year into a sinking fund at 4% interest
compounded semiannually in order to pay off the debt.
EXAMPLE NINE
The Mumbi family takes a 15- year mortgage of K2 000 000 for their new
home, at 10.8%, compounded monthly.
(a) Find their monthly payments
(b) Find the total of their payments over the full term.
EXAMPLE TEN
Construct a schedule for amortization of a debt of K10 000 with interest of
6.5% by 5 equal payments.

Tailoka Frank Patson Mathematical Analysis Academic Year 2020 - 2021