Annuity

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Annuity - is a series of equal payments occurring at equal

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interval of time.

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Types Of Annuity

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1. Ordinary Annuity

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Payments that starts at the end of each period starting from the first

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period. F

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R R R R R R R

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0 1 2 3 4 5 6 n
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 Annuity

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C. Or

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D. The most convenient solution in solving i is by “trial

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and error” method by the substitution of the given

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values in the given choices.

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Where:
P = present worth
o. ou F = future worth
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i = interest rate per period = in / m n = no. of periods = m y
eH y

R = uniform amount per period

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 Practice Problems

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1. If P50 was invested at 6% on January 1, year 1, what an equal year-

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end withdrawals could be made each year for ten years, leaving nothing

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in the fund after the tenth withdrawal.

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 2. Mr. Robles plans a deposit P500.00 at the end of each month for 10
years at 12% annual interest, compounded monthly. The amount that will

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be available in two years is:

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 3. How much could be accumulated in a fund earning 6% at the end of
ten years P20,000 is deposited at the end of each year for ten years?

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 Annuity

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2. Deferred Annuity

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Payments start at any period after the first

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period.

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A. Solving for the present worth P:

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F
R R R R R R

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0 1 2 3 4 5 6 7 8 9 10

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P P1
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 Practice Problems

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1. A house and lot can be acquired a down payment of P500,000.00 and

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a yearly payment of P100,000 at the end of each year for a period of 10

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years, starting at the end of 5 years from the date of purchase. If money
is worth 14% compounded annually, what is the cash price of the

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property?

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 2. A mother borrowed P100,000 with 2% interest monthly and promised

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to pay the amount by 30 equal monthly installments starting 1 year from

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now. Determine the monthly payment.

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