Lesson 28: Simple Annuity SHOW YOUR SOLUTION before giving your answer/s in the following:

1. Find the future value F of the ordinary annuity having semi-annual payments of P12,500 with
interest rate of 10.5% compounded semi-annually for 6 years.
𝑮𝒊𝒗𝒆𝒏:
(1+𝑖)𝑛 −1
𝑅 = ₱12, 500 𝑛 = 𝑚𝑡 𝐹=𝑅 𝑖
(1+ 0.0525)12 −1
𝑡 = 6 𝑦𝑒𝑎𝑟𝑠 𝑛 = 2 (6) = 12, 500 0.0525
1.847843787−1
𝑟 = 0.105 𝒏 = 𝟏𝟐 = 12, 500
0.0525
0.847843787
𝑚=2 = 12, 500 0.0525
𝑟
𝑛 = 12 𝑖=𝑚 = 12, 500 (16.14940547)
.105
𝑖 = 0.0525 𝑖= 2
𝑭 = ₱𝟐𝟎𝟏, 𝟖𝟔𝟕. 𝟓𝟕
𝒊 = 𝟎. 𝟎𝟓𝟐𝟓

The future value of the ordinary annuity having

semi-annual payments of ₱12, 500 with interest rate
of 10.5% compounded semi-annually for 6 years is
₱𝟐𝟎𝟏, 𝟖𝟔𝟕. 𝟓𝟕.

2. Find the monthly installment of the ordinary annuity of an appliance cash prize of P20,000 for 6
months with an interest rate of 6% compounded monthly.
𝑮𝒊𝒗𝒆𝒏:
𝑷
𝑃 = ₱20, 000 𝑛 = 𝑚𝑡 𝑹= 𝟏−(𝟏+𝒊)−𝒏
𝒊

20,000
𝑡 = 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑛 = 12 (.05) = 1−(1+0.005)−6
0.005

20,000
𝑛=6 𝒏=𝟔 = 1−(1.005)−6
0.005

20,000
𝑚 = 12 = 1−0.970518078
0.005

0.06 20,000
𝑟 = 0.06 𝑖= = 0.029481922
12
0.005

20 000
𝑖 = 0.005 𝒊 = 𝟎. 𝟎𝟎𝟓 = 5.8963844

𝑹 = ₱𝟑, 𝟑𝟗𝟏. 𝟗𝟏

The monthly installment of the ordinary annuity of

an appliance cash prize of ₱𝟐𝟎, 𝟎𝟎𝟎 for 6 months
with an interest rate of 6% compounded monthly is
₱𝟑, 𝟑𝟗𝟏. 𝟗𝟏.
3. Shirl deposits P10,000 every 3 months in a time deposit account giving 2% interest rate
compounded quarterly. How much will she save at the end of 5 years? How much interest is earned
in all deposits?
𝑮𝒊𝒗𝒆𝒏:
(1+𝑖)𝑛 −1
𝑅 = ₱10,000 𝑛 = 𝑚𝑡 𝑭=𝑅
𝑖

(1+0.005)20 −1
𝑡=5 𝑛 = 4(5) = 10,000
0.005

(1.005)20 −1
𝑛 = 20 𝒏 = 𝟐𝟎 = 10,000 0.005

𝑟
𝑚=4 𝑖=𝑚 𝑭 = ₱209,791.15

0.02
𝑟 = 0.02 𝑖= 4
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒆𝒅 = (𝑅)(𝑛)

𝑖 = 0.005 𝒊 = 𝟎. 𝟎𝟎𝟓 = (10,000)(20) = 𝟐𝟎𝟎, 𝟎𝟎𝟎

𝑭 − 200,000 = ?

₱209,791.15 − 200,000

𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒆𝒅 = ₱9,791.15

Shirl will be able to save ₱𝟐𝟎𝟗, 𝟕𝟗𝟏. 𝟏𝟓 by the end of 5 years when she
deposits ₱𝟏𝟎, 𝟎𝟎𝟎 every 3 months with 2% interest rate compounded
quarterly.
The interest earned in all deposits would be 9,791.15.

4. Mr. Bautista bought a car and gave an initial payment of P180,000 as down payment. The
remaining balance is to be settled by paying P18,000 at the end of each month for 5 years. If
interest is 10% compounded monthly, what is the cash price of his car?
𝑮𝒊𝒗𝒆𝒏:
1−(1+𝑖)−𝑛
𝑑𝑜𝑤𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 (𝐷) = ₱180,000 𝑷= 𝑅 𝑖
0.1 −60
1−(1+ )
𝑃 =? 𝑛 = 𝑚𝑡 = 18,000 12
0.1
12

𝑅 = ₱18,000 𝑛 = 12(5) = 18,000 (47.06536902)

𝑛 = 60 𝒏 = 𝟔𝟎 𝑷 = ₱847,176.64
𝑡 = 5 years
 𝑟
𝑚 = 12 𝑖= 𝑪𝒂𝒔𝒉 𝑽𝒂𝒍𝒖𝒆 = 𝐷 + 𝑃
𝑚
0.1
𝑟 = 0.1 𝑖= 12
= 180,000 + 847,176.64

𝑖 = 0.00833 𝒊 = 𝟎. 𝟎𝟎𝟖𝟑𝟑 𝑪𝑽 = ₱1,027,176.64

The total cash value of the car is ₱𝟏, 𝟎𝟐𝟕, 𝟐𝟓𝟓. 𝟏𝟐 if

the remaining balance is to be settled by paying
P18,000 at the end of each month for 5 years with
10% interest compounded monthly.

5. A teacher will be retiring in 15 years. At her retirement, she wants to save a fund of 1 million pesos.
She invested at a fund that gives 4% compounded semi-annually. How much should she deposit every
6 months in order to have this amount upon retirement?
𝑮𝒊𝒗𝒆𝒏:
(1+𝑖)𝑛 −1
P = ₱1 000 000 𝐹=𝑅 𝑖

(1+0.02)30 −1
t = 15 years 1000000 = 𝑅 0.02

(1+0.02)30 −1
r = 0.04 1000000 = 𝑅 0.02
𝑟 0.04 1000000 𝑅40.56807921
𝑖 = 0.02 𝑖= = = 0.02 =
𝑚 2 40.56807921 40.56807921

n = 30 n = m(t)= (15)(2) = 30

m=2 𝑹 = ₱𝟐𝟒, 𝟔𝟒𝟗. 𝟗𝟐

R=?

The teacher should deposit an amount of

₱𝟐𝟒, 𝟔𝟒𝟗. 𝟗𝟐 every 6 months for 15 years in order
to have a fund of ₱1 Million upon her retirement.

Lesson 29: General Annuity SHOW YOUR SOLUTION before giving your answer/s in the following:

1. Find the annual payment for the present value of P100,000 for 2 years with an interest rate of 12%
compounded semi-annually.
 𝑮𝒊𝒗𝒆𝒏: 𝒎𝟐 𝑷
𝒓(𝒎𝟐) 𝒎𝟏 𝑹=
𝟏 − (𝟏 + 𝒊)−𝒏
𝒊 = ቆ𝟏 + ቇ −𝟏
𝒎𝟐 𝒊
𝑃 = ₱100,00 2
0.12 1 100,000
𝑚1 = 1 = ൬1 + ൰ −1
2 =
𝑚2 = 2 1 − (1 + 0.1236)−2
𝑟 (𝑚2 ) = 12% 𝑜𝑟 0.12 = (1 + 0.06)2 − 1 0.1236
𝑛=2 = (1.06)2 − 1
100,000
𝑖 = 0.1236 = 1.1236 − 1 =
𝑅 =? 1 − (1.1236)−2
𝒊 = 𝟎. 𝟏𝟐𝟑𝟔
0.1236

100,000
=
1 − 0.7920936632
0.1236

100,000
=
0.2079063368
0.1236

100,000
The annual payment for the present valu/e of =
1.682090104
₱100,000 for 2 years with an interest rate of 12%
compounded semi-annually is ₱59,499.85. 𝑹 = ₱𝟓𝟗, 𝟒𝟒𝟗. 𝟖𝟓

2. A motorcycle is for sale P60,500 cash or an installment terms P3,000 per month for 2 years at 12%
compounded annually. If you were the buyer, what would you prefer cash or installments? Why?
𝑮𝒊𝒗𝒆𝒏:

𝒓 𝒏𝒕
(𝟏+ ) −𝟏
𝒏
P = ₱3000 𝑭𝑽 = 𝑷 [ 𝒑 ]
𝒓
(𝟏+ ) 𝒄 −𝟏
𝒏

𝟎.𝟏𝟐 (𝟏)(𝟐)
(𝟏+ ) −𝟏
𝟏
t = 2 years = 𝟑𝟎𝟎𝟎 [ 𝟏 ]
𝟎.𝟏𝟐 𝟏𝟐
(𝟏+ ) −𝟏
𝟏

(𝟏.𝟏𝟐)𝟐 −𝟏
r = 0.12 = 𝟑𝟎𝟎𝟎 [(𝟏.𝟏𝟐)𝟎.𝟎𝟖𝟑𝟑𝟑𝟑𝟑𝟑𝟑 −𝟏]

𝟏.𝟐𝟓𝟒𝟒 −𝟏
n=1 = 𝟑𝟎𝟎𝟎 [𝟏.𝟎𝟎𝟗𝟒𝟖𝟖𝟕𝟗𝟑 −𝟏]

𝟎.𝟐𝟓𝟒𝟒
p=1 = 𝟑𝟎𝟎𝟎 [ ]
𝟎.𝟎𝟎𝟗𝟒𝟖𝟖𝟕𝟗𝟑 If I were the buyer, I prefer cash over installment
c = 12 = 𝟑𝟎𝟎𝟎 [𝟐𝟔. 𝟖𝟏𝟎𝟓𝟕𝟓𝟑𝟖] because through this I will be able to save almost
₱20,000 for the motorcycle. In other words, if I
𝑭𝑽 = ₱ 𝟖𝟎, 𝟒𝟑𝟏. 𝟕𝟑 choose cash, I’ll be spending ₱60,500 instead of
₱𝟖𝟎, 𝟒𝟑𝟏. 𝟕𝟑 when I did the installment.
Lesson 30: Deferred Annuity SHOW YOUR SOLUTION before giving your answer/s in the following:
1. A condominium unit is available at P29,000 monthly, payable in 20 years. The first payment is due
in 2 years exactly the time when the condominium will be returned to the buyers. How much is the
cash value if the interest rate is 10% convertible monthly?
Given:
R = P29,000 1− (1+𝑖)−(𝑘+𝑛) 1− (1+𝑖)−𝑘
𝑃=𝑅 𝑖
−𝑅 𝑖
−
0.1
i= 12 0.1 −(23+240) 0.1 −23
1− (1+ ) 1− (1+ )
12 12
n = 240 n = mt = (12)(20) = 240 = 29,000 0.1 − 29,000 0.1
12 12

k = 23 months 0.1 −263 0.1 −23

1− (1+ ) 1− (1+ )
12 12
= 29,000 − 29,000
m = 12 0.1
12
0.1
12

r = 0.1 𝑃 = 2,482,939.20
t = 20 years
The cash value if the interest rate
is 10% convertible monthly is
P2,482,939.20

2. A savings account may allow the owner to withdraw P30,000 semi-annually for 3 years starting at

the end of 3 years. How much is the savings if the interest rate is 4% converted semi-annually?

Given:

R = P30,000 1− (1+𝑖)−(𝑘+𝑛) 1− (1+𝑖)−𝑘

𝑃=𝑅 𝑖
−𝑅 𝑖
−
m=2
1− (1+0.02)−(5+6) 1− (1+0.02)−5
= 30,000( 0.02
)− 30,000( 0.02
)
r = 0.04
0.195737 0.0942692
t = 3 years = 30,000( 0.02
)− 30,000( 0.02
)
𝑟 0.04
i=𝑛 = = 0.02 = 30,000(9.78685) − 30,000(4.71346)
2

n = mt = 2(3) = 6 = 30,000(9.78685) − 30,000(4.71346)

k = 5 months = 293605.5-141403.8

𝑃 = 152,201.66
The savings if the interest rate is
4% converted semi-annually is
P152,201.66.