Activity 3.

4 Simple Annuity

Answer the following problems.  Show your solutions. (15 pts)

1. Medyo Maldito plans to buy a Samsung Galaxy J1, smartphone. To accumulate

the needed amount, he deposits ₱600 a month for 9 months at a bank paying 2.5%
interest, converted monthly. How much will he save after such period?
2. How much will Snake Princess pay semi-annually for 2 years to settle a debt
of ₱50,000? If the money is worth 8% compounded semi-annually.

Given:

j 0.08
P = ₱50,000; f = 2; j = 8%=0.08; t = 2 years; i = = ; n =f t= 2(2)=4
f 2

Pi
A= −n
1− (1+i )

A=
50,000 ( 0.082 )
1− ¿ ¿

A =13,774.50

3. If Matt Lubid deposits ₱5,000 every end of the month, when can he buy a laptop
worth ₱30,000, if the money is worth 5% compounded monthly?
4. Lenarr Sanchez made a down payment of ₱20,000 for the smart TV
costs ₱90,000. He agreed to pay the remaining balance by paying ₱8,000 every two
months.  If the money was worth 3% compounded every two months, how long did it
take him to pay the balance including the interest?  How much was the
last payment?
5. Arjay’s deposit is ₱2,000 every end of the month amounted to ₱50,000 after 2
years and 4 months. Compute for the nominal rate compounded monthly.
 DECIDE

Lanz Angelo works in a call center company and earns a net worth of ₱36,000 per month.  He
plans to loan ₱700,000 to put up an internet café business.  A bank offers him 8% interest
1
compounded every three months.  If Lanz Angelo will set aside   of his monthly earnings to pay
3
his debt quarterly, for how long will he settle that debt?

Given:
P= 700,000
j= 8% =0.08
f=4
j 0.08
i= =
f 4
A= 36,000

Solution:
log A − log( A − Pi )
t=
f log(1+i)
t=log36000 − log¿ ¿ ¿ ¿
log 36000− log 22000
t=
4 log( 1.02)
0.21388
t=
0.03440
t=6.22 years∨74.64 montℎs

Solve the following problems.  Show your solutions. (30)

1. Mr. Arbey Jan bought a brand new Picanto car at SM City. He agreed to pay a
down payment of ₱100,000 and a monthly payment of ₱15,000 for 5 years.  What is
the cash value of the Picanto car if the money is worth 4.5% compounded monthly?

j 0.045
Given: A= ₱15,000; i = = ; n= ft = 12(5) = 60
f 12

Unknown: amount of the ordinary annuity C

Solution:
 C = A¿

C = 15,000¿

C = ₱ 1,007,183.28209668 / ₱ 1,007,183.28

2. If the money is worth 3.5% compounded monthly, how much will Mr.  Gilfred
Domini deposit every end of the month for 1 year and 3 months in order to buy a
Toyota Wigo worth ₱900,000?

j 0.035
Given: C = ₱ 900,000; f = 12; j = 3.5% = 0.035; t = 1.25; i = = ;
f 12

n= ft = 12(1.25) = 15

Unknown: periodic payment A

Solution:

Ci
A=
(1+i)n −1

A=

A= ₱ 58,784.5136061 / ₱ 58,784.51

3. Stephen Ray borrowed ₱90,000 from a lending company. How long will it take
him to settle his obligation if he will make monthly payments of ₱5,000 and the
money is worth 3.5% compounded monthly?
4. A fund of ₱500,000 was established by Mr. Dan Jose to open a movie house at
Sancianco Street, Cebu City. He deposited ₱25,000 every end of three months at
3.5% compounded quarterly.  How long did it take him to accumulate the fund? 
How much was the final deposit?
 5. A 3-in-1 (print-copy-scan) machine worth ₱35,000 on installment basis with a
down payment of ₱15,000. The remaining balance is payable on monthly
installment of ₱2,000 for 10 months.  Compute for the nominal rate compounded
quarterly.

Solution: P = amount of A 3-in-1 (Print, Copy, Scan) machine – down payment

= 35,000 – 15,000
P = ₱ 20,000
Given: P = ₱ 20,000; A = ₱ 2, 000; t = 0.8; n = ft = 10(.8) = 8
nA
i= √
−6 ( n −1 ) − [ 6 ( n+1 ) ] −48 ( n2 − 1 ) [1 −
2( n¿¿ 2− 1)¿
P
]

= −6 ( 8− 1 ) − √¿ ¿ ¿
i= 0.0369

Then, solve for the nominal rate j:

j= f(i)
=10 ( 0.0369)
j= 0.369 = 36.9%

6. On the 7th birthday of Ryan Jeff, he began depositing ₱2,000 every two months at
8% compounded bimonthly until he reached 15 years old. After his last deposit,
the accumulated savings remained in the bank for 10 years at 12% compounded
quarterly.  Compute for his total savings by the time he celebrated his 25 th