ENGINEERING MIDTERM

01/06
MANAGEMENT LECTURE / FIRST SEMESTER

ANNUITIES
DEFINITION
 a series of equal payments made at equal intervals of time

TYPES OF ANNUITIES
1. Ordinary Annuities
2. Deferred Annuities
3. Annuity Due
4. Perpetuity

ORDINARY ANNUITY

 is one where the equal payments are made at the end of each payment period
starting from the first period
a. PRESENT WORTH:
P= A ¿ ¿
b. FUTURE WORTH:
F= A ¿ ¿
EXAMPLE PROBLEMS
1.

DEFERRED ANNUITY

 it is also ordinary annuity but the payment of the first amount is deferred a certain
number of periods after the first.

EXAMPLE PROBLEMS

ANNUITY DUE

 is one where payments are made at the start of each period, beginning from the first
period.
a. PRESENT WORTH:
P= A ¿ ¿
b. FUTURE WORTH:
F= A ¿ ¿
EXAMPLE PROBLEM

Ma. Elaine T. Francisco | 1

ENGINEERING MIDTERM
01/06
MANAGEMENT LECTURE / FIRST SEMESTER

1.

PERPETUITY

 is one where the payment periods extend forever or in which the periodic payments
continue indefinitely
A
P=
i
 perpetuity payable annually beginning of each year
A
P= A+
i
 perpetuity payable annually with the first payment due at the end of “nth” year
A
P= −A¿¿
i
EXAMPLE PROBLEMS

GRADIENT
DEFINITION
 in certain cases, Engineering Economy problems involve a series of disbursements
or receipts that increase or decrease in each succeeding period by varying amounts
 if the change in succeeding periods is constant, then the series is known as a
uniform arithmetic gradient
 a geometric gradient series is a sequence consisting of end-of-period payments,
where each payment increases or decreases by a fixed percentage
 in a geometric gradient, payment begins at the end of the first period

UNIFORM ARITHMETIC GRADIENT

GEOMETRIC GRADIENT

Ma. Elaine T. Francisco | 2