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BSBA MKT
2A
What is
Simple
Annuity?
 What Is Annuity?

An Annuity is a sequence of equal payments made at equal periods

or time intervals. These payments may be made annually semi-
annually, quarterly or at other periods.

There are three types of simple annuities and they are Ordinary Annuities, Annuity
Dues and Deferred Annuities. These annuities differ only by the date of the first
regular payment and hence, it would be natural to see a relationship between the
formulas for the accumulated value or present value of an annuity compared to the
other
 ORDINARY ANNUITY
TYPES OF SIMPLE payments are made at the END of each
ANNUITY payment interval

ANNUITY DUES
payments are made at the BEGINNING of
each payment interval
DEFERRED ANNUITY
an ordinary annuity which the first
payment is made AT SOME LATER DATE
 Ordinary Annuity Formulas:
Where: Sum of Accumulated Value:
S = Sum of Accumulated Value
A = Present Value
R = Regular Payments
i = interest rate per period
(interst/conversion period) Present Value:
n = total number of payments
(number of years x conversion
period)
Conversion Period: Periodic Payments:
Annually = 1
Semi - Annually = 2
Quarterly = 4
Monthly = 12
PROBLEM :
Michele wants to venture into the food business stands. She plans to create a fund by
making deposits of 𝑃ℎ𝑝 30,000 at the end of every 6 months in a bank that gives 4%
interest compounded semi-annually, how much money will be in the fund after 4 years?

Given:
R = Php 30,000
i = .04 / 2 (semi - annually) = .02
n = 4 years x 2 (semi - annually) = 8 payments
SOLUTION :
PROBLEM :
A father wants to invest Php 1.5M in a financial institution that gives 8%
compounded monthly so that he could give a monthly allowance for his daughter
for the next 15 years. How much will the monthly allowance be?

Given:
A = 1,500,000
i = .08 / 12 (monthly) = 1/50
n = 12 (monthly) x 15 years = 180
SOLUTION :
PROBLEM :
Ms. Fe Suyat wants to have Php 500,000 five years from now in preperation for her
small business. what amount must she deposit at the end of every three months in
a fund that gives 12 1/4% compounded quarterly?

Given:
S = 500,000
i = .1225 / 4 (quarterly)
n = 5 year x 4 (quarterly) = 20
SOLUTION :
PROBLEM :
What sum will be paid at the end of every month for three years and nine
months, if the present value of Php 20,000 and interest ratw is 7 5/8%
compounded monthly?

Given:
A= 20,000
i = .07625 / 12 (monthly)
n = 12 months x 3 9/12 (3.75 years) = 45
SOLUTION :
 Annuity Due Formulas:
Where: Sum of Accumulated Value:
Sdue = Sum of Accumulated Value
Adue = Present Value
R = Regular Payments
i = interest rate per period
(interst/conversion period) Present Value:
n = total number of payments
(number of years x conversion
period)
Conversion Period: Periodic Payments:
Annually = 1
Semi - Annually = 2
Quarterly = 4
Monthly = 12
PROBLEM :
Determine the final amount and present value of an annuity with Php 1,500
payable at the beginning of every three months for six years anf nine months if
money is worth 12 3/8% compounded quarterly

Given:
R= 1,500
i = .12375 / 4 (quarterly)
n = 6 9/12 (6.75 years) x 4 (quarterly) = 27
SOLUTION :
SOLUTION :
PROBLEM :
Mikay has a debt of Php 53,000 that bears an interest of 8 1/8% compounded
semi - annually. if she is going to repay it in installments at the beginning of
every six months for 4 years and 6 months. find the semi - annuall payment of
Mikay

Given:
Adue = 53,000
i = .08125 / 2 (semi - annually)
n = 4 6/12 (4.5 years) x 2 (semi - annually) = 9
SOLUTION :
 Deferred Annuity Formulas:
Where: Present Value:
Adef = Present Value
R = Regular Payments
d = deferment period (n - 1)
i = interest rate per period
(interst/conversion period)
n = total number of payments Periodic Payments:
(number of years x conversion
period)
Conversion Period:
Annually = 1
Semi - Annually = 2
Quarterly = 4
Monthly = 12
PROBLEM :
Determine the present value of deferred annuity of Php 900 every three
months for 4 years and 9 months that is deferred for 2 years. if money is
worth 8 1/2% converted quarterly

Given:
R = 900
i = .085 / 4 (quarterly)
n = 4 (quarterly) x 4 9/12 (4.75 years) = 19
d = 2 x 4 (quarterly) - 1 = 7
SOLUTION :
PROBLEM :
Andre, a computer programmer wizard decides that he would like the present value of his
first home owner's savings account to be worth Php 750,000. If Andre is currently 20 and
also believes that he may need more time to save for his first home, so he doesn't plan to
purchase a house until he is 30. Andre also decides to start making regular payments at
21. how much will Andre need to deposit each period, if he makes 4 payments a year and
the interest rate is 9%coumpounded quarterly?
Given:
Adef = 750,000
i = .09 / 4 (quarterly)
n = 4 (quarterly) x 9 years - 1 = 37
d = 2 years x 4 (quarterly) -1 = 7

NOTE: Finding d and n

Difference of his age: 30 - 21 = 9 years
Deferred Year: 21 - 20 = 1 year
SOLUTION :
 Thank you
for listening!
Manalo, Marinelle Cee
Mareposque, Franziene Ann
Mesia, Stephanie
Monares, Marjhanie
Mundo, Ynah