Annuity Due

- Is an annuity whose first payment occurs immediately which means that the payment are made at the
beginning of each payment intervals. The present value of an annuity due is the sum of all present value of all
payment. The final amount is the sum of the accumulated values at the payment at the end of the term.

• Final Amount-is the sum of all accumulated value of all the payment at the end of the term.
• Present Value- is the sum of all accumulated value of all the payment at the end of the term.

R = Periodic Payments (can also be determined using the final amount or the present value).
i = interest rate
j = nominal rate
m = conversion period per year

Contract owner
Annuitant
Beneficiary
Insurance carrier

Amortization- is paying both the principal and the interest by equal payments at equal intervals
until the principal and the interest gradually reduces. We use an amortization table to easily illustrate
how this works. There are two ways of amortizing a loan: with regular payments, and with final
irregular payments.

Finding the Outstanding Principal

Outstanding Principal or Outstanding Balance is the amount of debt that has not yet been paid. There
are two ways of finding the Outstanding Principal:
1. Prospective Method- This method is used when all the periodic payments are equal and regularly paid.
a. Outstanding Balance (OB)
b. Interest Paid I (n−k)
c. Principal repaid Prepaid

k = number of past payments

k – n = number of payments to be made

2. Retrospective Method- It is used when the final payment is not the same as the regular periodic payments.

Sinking fund- is a kind of fund in which a fixed amount is deposited at a regular interval. So the sinking fund is like a
recurring deposit. After some years this fund turns into a huge collection of funds that are further used to repay the
previous debt taken by the government or a company.

Sinking Fund schedule- is a table showing gradual growth of money deposited to create a fund. It shows how much
interest is earned every period, and amount before and after periodic deposits.

Where:
R = periodic payment
i = periodic rate( )
j = nominal rate
m = conversion period per year
t = time expressed in years
n = total conversion period ()

Bonds
1. a relationship between people or groups based on shared feelings,
interests, or experiences.
2. connection between two surfaces or objects that have been joined
together, especially by means of an adhesive substance, heat, or pressure.
1. join or be joined securely to something else, especially by means of an adhesive substance, heat, or pressure.
2. join or be joined by a chemical bond.

Bond ( financial )

1. It is an interest bearing contract which obligates the borrower (the issuer) to make payments of interest and
principal on specific dates to the holder of the bond
2. Nothing more than a loan

3. It is a debt security that pays a fixed amount of interest until maturity

4. A bond is an agreement between an investor and the company, government, or government agency that
issues the bond.
When investors buy a bond, they are loaning money to the issuer in exchange for interest and the return of
principal at maturity. Because bonds

traditionally pay the investor a fixed interest rate periodically, they are also
known as fixed-income securities.
Unlike stocks, bonds don’t make the investor an owner of the bond issuer: the
investor becomes a lender to a company, city, or government.

Categories of Bonds
 There are four primary categories of bonds sold in the markets. However, you may also see foreign
bonds issued by corporations and governments on some platforms.

 Corporate bonds-  are issued by companies. Companies issue bonds rather than seek bank loans for debt
financing in many cases because bond markets offer more favorable terms and lower interest rates.

 Municipal bonds- are issued by states and municipalities. Some municipal bonds offer tax-free coupon
income for investors.

 Government bonds-  such as those issued by the Phil Treasury. Bonds issued by the Treasury with a year or
less to maturity are called “Bills”; bonds issued with 1–10 years to maturity are called “notes”; and bonds
issued with more than 10 years to maturity are called “bonds”. The entirecategory of bonds issued by a
government treasury is often collectivelyreferred to as "treasuries." Government bonds issued
by national governments may be referred to as sovereign debt.

 Agency bonds- are those issued by government-affiliated organizations