GENERAL MATHEMATICS 11

QUARTER 2

Name of Learner: _____________________________ Grade Level: _______________

Section: ______________________________________ Date: ______________________

LEARNING ACTIVITY SHEET #4.2

I. Introduction
In your previous lesson, you learned how to find the future and present
value of an annuity as well as solve the fair market value of a cash flow
stream that includes an annuity. In this Learning Activity Sheet, you will
learn how to analyze and solve problems about annuities, wherein payments
do not necessarily start at the beginning or at the end of the next
compounding period.

II. Learning Competency

Calculates the present and period of deferral of a deferred annuity.
M11GM-IId-3
III. Objectives
a.) Determine the period of deferral of a deferred annuity.
b.) Find the present value of a deferred annuity.
IV. Discussion
What is deferred annuity?
A deferred annuity is a kind of annuity whose payments (or deposits) start
in more than one period from the present.
What is period of deferral?
The time between the purchase of an annuity and the starts of the payments
for the deferred annuity is called period of deferral.
Illustration

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 In the time diagram, the period of deferral is k, because the regular
payments of R, starts at the time k+1.
The rotation R* represents “artificial payments”, each equal to R but are
not actually paid during the period of deferral.

Examples on finding the period of deferral

Monthly payments of Php 50,000 for 3 years that will start 8 months from now.

SOLUTION: The first payment is at time 8. The period of deferral is from time 0
to 7, which is equivalent to 7 periods or 7 months.
1.) Annual payments of Php 2,500 for 24 years that will start 12 years from now.
SOLUTION: The first payment is at time 12. The period of deferral is from time 0
to 11, which is equivalent to 11 periods or 11 years.

Present value of a deferred annuity

The present value of a k-year deferred annuity at interest rate i compounded m

times a year with regular payments R for t years is given by:

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Example 1
A certain fund is to be established today in order to pay for the Php 5,000
worth of monthly rent for a commercial space. If the payments for rent will start
next year and the fund must be sufficient to pay for the monthly rental for 2 years,
how much must be deposited at 2.5% interest compounded monthly?
Solution:
Consider a 3-year timeline for the illustration. Since the payment will start
next year, then the first year (12 compounding period) is known as the period of
deferral.
The payment will start at the end of the 12 th month and end at the end of
the 36th month.

GIVEN: R = Php 5,000, i = 0.025, m = 12, t = 2 (since the payment period is 2 years)

P = Php 114,046.58
Thus, the amount of deposit needed today is Php 114,046.58

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 ❑
❑

Php 116,930.64
Php114,046.58
Php 114,046.58

Notice that there are two stages in finding the present value of a deferred
annuity: (1) find the value of the payment at the start of the payment period by
using the formula for the present value of an annuity, and then (2) find the value of
the amount to be obtained at the start (or time 0) by using the formula for the
present value of a single amount in the formula of the present value of a deferred
annuity.
If the period is k-years, you call the annuity a k-year deferred annuity.
Example 2
Mariel purchased a smart television set through the credit cooperative of their
company. The cooperative provides an option for a deferred payment. Mariel
decided to pay after 2 months of purchase. Her monthly payment is computed as
Php 3,800 payable in 12 months. How much is the cash value of the television set,
if the interest rate is 12% convertible monthly?

Given:
R = Php 3,800, i = 12% or 0.12, m = 12, t = 1, k = 1
n = mt = (12)(1)=12, j = i/m = 0.12/12= 0.01

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 [ ] [ ]
− ( k +n) −k
1−( 1+ j ) 1−( 1+ j )
P=R −R
j j

[ ] [ ]
− ( 12+1) − ( 1)
1−( 1+0.01 ) 1−( 1+0.01 )
P=3,800 −3,800
0.01 0.01

P = 46,108.21 – 3,762.38
P = Php 42,345.83

V. Activity
Activity 1: Where do I begin?
Directions: Determine the period of deferral of the following deferred annuity.
Write your solution on a separate sheet of paper.
a) Semi-annual payments of Php 6,000 for 13 years that will start 4 years
from now.
b) Annual payments of Php 2,500 for 24 years that will start 12 years from
now.

Activity 2: It’s my goal !

Directions: Read the given problem carefully, calculate the present value of
this deferred annuity. Write your solution on a separate sheet of paper.
Problem: Mr. Tinio wants to receive a consistent amount from a bank that
offers 6% interest to be compounded annually. If he will delay his
withdrawal for the first 5 years, how much should he deposit now to receive
Php 100,000.00 every year for the next 10 years after the period of
deferral?

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VI. Assessment
Directions: Choose the letter of the correct answer and write it on a separate
sheet of paper.
1) It is an annuity that does not begin until a given time interval has passed.
A) Deferred annuity C) Period of Deferral
B) Contingent annuity D) Present value of a deferred annuity
2) It is a time between the purchase of an annuity and the start of the
payments for the deferred annuity.
A) Deferred annuity C) General Ordinary Annuity
B) Period of deferral D) Present value of a deferred annuity
3) Melvin availed a loan from a bank that gave him an option to pay Php
20,00 monthly for 2 years. The first payment is due after 4 months. How
much is the present value of the loan, if the interest rate is 10% converted
monthly?
A) Php 422,579.78 C) Php 422,759.78
B) Php 422,597.78 D) Php 422,795.78
4) Annual payments of Php 2,500 for 24 years that will start 12 years from
now. What is the period of deferral in the deferred annuity?
A) 10 periods C) 12 periods
B) 11 periods D) 13 periods
5) What is the period of deferral in the deferred annuity, if semi-annual
payments of Php 6,000 for 13 years will start 4 years from now?
A) 5 semi-annual intervals C) 7 semi-annual intervals
B) 6 semi-annual intervals D) 8 semi-annual intervals

VII. References
Lynie Dimasuay, Jeric Alcala, Jane Palacio and Alleli Ester Domingo. General
Mathematics Book. C & E Publishing, Inc., pp. 106-112
General Mathematics. Department of Education Teachers Materials,
pp. 168-205

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 VIII. Answer Key

Activity 1
a) Solution: The first payment is at time 8. The period of deferral is
from time 0 to 7, which is equivalent to 7 periods or 7 semi-annual
intervals.
b) Solution: The first payment is at time 12. The period of deferral is
from time 0 to 11, which is equivalent to 11 periods or 11 years.

Prepared by:
Activity 2
P = P549,988.52 (Note: P = Present Value of Deferred Annuity)
Enrique B. Assessment
Peralta
Teacher III, CDPNHS
1) A 2) B 3) C 4) B 5) D

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