WEEKLY LEARNING ACTIVITY SHEET

General Mathematics, Quarter 2, Week 3

SIMPLE ANNUITY

Name: ___________________________________________ Section: ____________________

Learning Objectives:
- illustrates simple and general annuities(M11GM-IIc-1).
- distinguishes between simple and general annuities (M11GM-IIc-2).
- finds the future value and present value of simple annuities(M11GM-IId-1).

- Time Allotment: 4 hours

Key Concepts
• In most cases where house or cars are purchased, a series of payments is needed at
certain points in time. Such Transaction is called ANNUITY.
• An ANNUITY is a sequence of equal payments (or deposits) made at a regular interval of
time.

ANNUITY

According to payment Simple Annuity – an General Annuity – an annuity

interval and interest annuity where the payment where the payment interval is
period interval is the same as the not the same as the interest
interest period . period.

According to time of Ordinary Annuity (Annuity Immediate) – a type of annuity

payment in which the payments are made at the end of each payment
interval

According to duration Annuity Certain – an annuity in which payments begin and

end at definite times.

• Term of an Annuity (t) is the time between the first payment interval and the last
payment interval.
• Regular or Periodic Payment (R) is the amount of each payment.
• Amount (Future Value) of an annuity (F) is the sum of future value of all the payments
to be made during the entire term of the annuity.
• Present Value of an annuity (P) is the sum of present value of all the payments to be
made during the entire term of the annuity.
• Annuities may be illustrated using a time diagram. The time diagram for an ordinary
annuity (i.e., payments are made at the end of the year) is given below.

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
 ILLUSTRATION
R R R R R........ ......... ..R
0 1 2 3 4 5 n

Time Diagram for an n Payment ordinary annuity

Example 1. Suppose Mrs. Manda would like to deposit P3,000 every month in a fund that
gives 9%, compounded monthly. How much is the amount of future value of her savings
after 6 months?

Given:
Periodic payment (𝑅𝑅) = 𝑃𝑃3,000
Term (𝑡𝑡) = 6 𝑚𝑚𝑜𝑜𝑛𝑛𝑛𝑛ℎ𝑠𝑠
Interest rate per annum (annually) (𝑖𝑖) = 0.09 𝑜𝑜𝑜𝑜 9%
Number of conversion per year (𝑚𝑚) = 12
𝑖𝑖 0.09
Interest rate per period 𝑗𝑗 = = = 0.0075
𝑚𝑚 12

(1) Illustrate the cash flow in time diagram and Find the future value of all the payments at the
end of term (t=6).

Time(in months) 0 1 2 3 4 5 6

Payment/ Deposit 3,000 3,000 3,000 3,000 3,000 3,000

3,000
3,000 (1 + 0.0075)

3,000 (1 + 0.0075) 2

3,000 (1 + 0.0075) 3

3,000 (1 + 0.0075) 4
5
3,000 (1 + 0.0075)
Add all the future values obtained from the cash flow.
3,000 = 3,000
3,000 (1 + 0.0075) = 3,022.50
3,000 (1 + 0.0075) 2 = 3,045.169
3,000 (1 + 0.0075) 3 = 3,068.008
3,000 (1 + 0.0075) 4 = 3,091.018
3,000 (1 + 0.0075) 5 = 3,114.200

Thus, the amount of this annuity is P18,340.89

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
 • FORMULA 1: FUTURE VALUE
The future value of an ordinary annuity with regular payments 𝑅𝑅 at a nominal interest
rate 𝑖𝑖 compounded 𝑚𝑚 times a year after 𝑡𝑡 years is
𝒊𝒊
(𝟏𝟏 + )𝒎𝒎𝒎𝒎 − 𝟏𝟏 (𝟏𝟏 + 𝒋𝒋)𝒏𝒏 − 𝟏𝟏
𝑭𝑭 = 𝑹𝑹 � 𝒎𝒎 � → 𝑭𝑭 = 𝑹𝑹[ ]
𝒊𝒊 𝒋𝒋
𝒎𝒎
𝑖𝑖
Note: 𝑗𝑗 = , 𝑛𝑛 = 𝑚𝑚𝑚𝑚.
𝑚𝑚

(2) Solution using formula 1

Given:

𝐴𝐴(𝑡𝑡) = ? 𝑅𝑅 = 3,000 𝑖𝑖 = 0.09 𝑚𝑚 = 12 𝑡𝑡 (𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎) = 6/12

𝑖𝑖
(1+ )𝑚𝑚𝑚𝑚 −1
𝑚𝑚
F = 𝑅𝑅[ 𝑖𝑖 ]
𝑚𝑚
0.09 12(0.5)
(1+ ) −1
= 3000[ 12
0.09 ]
12

(1+0.0075)6−1
= 3000[ ]
0.0075
(1.0075)6 −1
= 3000[ ]
0.0075
1.045852235−1
= 3000[ ]
0.0075
0.045852235
= 3000[ ]
0.0075
= 3000(6.1136313333)
𝐅𝐅 = 𝟏𝟏𝟏𝟏, 𝟑𝟑𝟑𝟑𝟑𝟑. 𝟖𝟖𝟖𝟖
Therefore, the amount of future value of Mrs. Manda’s savings after 6 months is
P18,340.89.
Thus, using different kinds of processes in finding the future value of an ordinary
annuity comes up with the same answer.

Example 2. Suppose Mrs. Manda would like to deposit P3,000 every month in a fund that
gives 9%, compounded monthly. How much is the amount of future value of her savings
after 6 months?
Given:
Periodic payment (𝑅𝑅) = P3,000
Term (𝑡𝑡) = 6 months
Interest rate per annum (annually) (𝑖𝑖) = 0.09 or 9%
Number of conversion per year (𝑚𝑚) = 12
𝑖𝑖 0.09
Interest rate per period 𝑗𝑗 = = = 0.0075
𝑚𝑚 12

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
 (1) Illustrate the cash flow in time diagram and Find the Present value of all the
payments at the end of term (t=6).
Time(in months) 0 1 2 3 4 5 6

Payment/ Deposit 3,000 3,000 3,000 3,000 3,000 3,000

3,000 (1 + 0.0075) -1
-2
3,000 (1 + 0.0075)
3,000 (1 + 0.0075) -3
3,000 (1 + 0.0075) -4
3,000 (1 + 0.0075) -5
3,000 (1 + 0.0075) -6

Add all the present values obtained from the cash flow.
3,000 (1 + 0.0075) -1 = 2,977.667
3,000 (1 + 0.0075) -2 = 2,955.501
3,000 (1 + 0.0075) -3 = 2,933.50
3,000 (1 + 0.0075) -4 = 2,911.663
3,000 (1 + 0.0075) -5 = 2,889.988
3,000 (1 + 0.0075) -6 = 2,868.474

Thus, the amount of this annuity is P17,536.79

FORMULA 2: PRESENT VALUE

b. The present value 𝑃𝑃 of an ordinary annuity with regular payments 𝑅𝑅 at a
nominal interest rate 𝑖𝑖 compounded 𝑚𝑚 times a year after 𝑡𝑡 years is

𝑖𝑖 −𝑚𝑚𝑚𝑚
1−( 1+ 𝑚𝑚 ) 1 −(1+ 𝑗𝑗 )−𝑛𝑛
𝑃𝑃 = 𝑅𝑅 [ 𝑖𝑖 ] 𝑃𝑃 = 𝑅𝑅 [ 𝑗𝑗 ]
𝑚𝑚

𝑖𝑖
Note: 𝑗𝑗 = 𝑚𝑚
𝑛𝑛 = 𝑚𝑚𝑚𝑚

(2) Solution using formula 2

Given:
𝑃𝑃 = ? 𝑅𝑅 = 3,000 𝑖𝑖 = 0.09 𝑚𝑚 = 12 𝑡𝑡 (𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎) = 6/12
𝑖𝑖 −𝑚𝑚𝑚𝑚
1−�1+𝑚𝑚�
𝑃𝑃 = 𝑅𝑅[ 𝑖𝑖 ]
𝑚𝑚

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
 0.09 −(12(0.5))
1−�1+ 12 �
= 3,000[ 0.09 ]
12
1−(1+0.0075)−6
= 3,000[ ]
0.0075

1−(1.0075)−6
= 3,000[ ]
0.0075

1−0.9561580178
= 3,000[ ]
0.0075

0.04384198223
= 3,000[ ]
0.0075

= 3,000(5.84559763)

𝑷𝑷 = 𝟏𝟏𝟏𝟏, 𝟓𝟓𝟓𝟓𝟓𝟓. 𝟕𝟕𝟗𝟗

PERIODIC PAYMENT R OF AN ANNUITY:

Periodic payment R can also be solved using the formula for

amount Future value F or Present Value P of an annuity.

𝑖𝑖 𝑚𝑚𝑚𝑚
( 1+ 𝑚𝑚 ) −1 𝐹𝐹
𝐹𝐹 = 𝑅𝑅 [ 𝑖𝑖 ] 𝑅𝑅 =
𝑚𝑚 𝑖𝑖 𝑚𝑚𝑚𝑚
�1 + � −1
[ 𝑚𝑚 ]
𝑖𝑖
𝑚𝑚

𝑖𝑖 −𝑚𝑚𝑚𝑚
1−( 1+ 𝑚𝑚 ) 𝑃𝑃
𝑃𝑃 = 𝑅𝑅 [ 𝑖𝑖 ] 𝑅𝑅 =
𝑚𝑚 𝑖𝑖
1 − (1 + )−𝑚𝑚𝑚𝑚
[ 𝑚𝑚 ]
𝑖𝑖
Note: j =
𝑖𝑖 𝑚𝑚
𝑚𝑚

n = mt

where R is the regular payment

P is the present value of an annuity

F is the future value of an annuity

j is the interest rate per period

n is the number of payments

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
Activities
Activity No. 1:
Instruction: Answer the questions briefly. Write your answer on the space provided.

1. Differentiate Simple Annuity and General Annuity?

2. What is an Ordinary Annuity?

3. What is the formula in finding the future value of an ordinary annuity? Identify each
variable represents.

4. What is the formula in finding the present value of an ordinary annuity? Identify each
variable represents.

5. What is the periodic payment formula of an annuity?

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
Activity No. 2:
Instruction: Solve the following problems and show your solutions. Write your answers on the
space provided.

1. Find the future value of an ordinary annuity with a regular payment of P3,000 at 3%
compounded quarterly for 3 years.

2. Find the present value of an ordinary annuity with regular quarterly payments worth
P2,000 at 12% annual interest rate compounded quarterly at the end of 5 years.

Activity No. 3:
What you need: pen
What to do: A television (TV) set is for sale at P12,599 in cash or on installment terms, P2,500
each month for the next 6 months at 8% compounded monthly. If you were the buyer, what
would you prefer, cash or installment? Explain. Refer to the Scoring Rubric below.

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com
Scoring Rubric
DISTINGUISHED-4 PROFICIENT-3 APPRENTICE-2 NOVICE-1
Understands Identifies special factors Understands the Understands Doesn't
the Problem that influences the problem enough to solve understand
approach before part of the problem enough to get
starting the problem or to get part of the started or
solution make
progress
Uses Explains why certain Uses all appropriate Uses some Uses
Information information is essential information appropriate inappropriate
Appropriately to the solution correctly information information
correctly
Applies Explains why Applies completely Applies some Applies
Appropriate procedures are appropriate appropriate inappropriate
Procedures appropriate for the procedures procedures procedures
problem
Uses Uses a representation Uses a Uses a Uses a
Representations that is unusual in its representation that representation that representation
mathematical precision clearly depicts the gives some that gives
problem important little or no
information about significant
the problem information
about the
problem
Answers the Correct solution of Correct solution Copying error, No answer or
Problem problem and made a computational wrong answer
general rule about the error, partial based upon
solution or extended the answer for problem an
solution to a more with multiple inappropriate
complicated solution answers, no answer plan
statement, answer
labeled incorrectly

References
Enterina, Angelie D. General Mathematics – Grade 11
Alternative Delivery Mode. Quarter 2 – Module 7: Annuities
First Edition. Department of Education – Bureau of Learning Resources (DepEd –
BLR).2020

Answer Key
Activity No. 1. Answers/outputs are expected to vary.
Activity No. 2. a. 37,522.76
b. 29,754.95
Activity No. 3. Answers/outputs are expected to vary.

Author: MARGIE B. ALALAN

School/Station: Tagbina National High School, Tagbina I
Division: Surigao del Sur
Email Address: alalanmargie@gmail.com