DEPARTMENT OF EDUCATION

DIVISION OF ANTIQUE
AURELIANA NATIONAL HIGH SCHOOL
AURELIANA, PATNONGON, ANTIQUE

WORKSHEET ON FAIR MARKET VALUE OF CASH FLOW STREAM

THAT INCLUDES ANNUITY

General Directions: Read each problem carefully and answer it systematically.

Show your complete solution and encircle your final answer.
Exercise 1: Your grandparents have decided to sell their real estate property in
the Province of Iloilo and they are planning to buy a property in Iloilo City. They
posted an online advertisement for this. Two offers came:
• Offer 1 : ₱500,000 down payment plus ₱1,500,000 lump-sum payment 10
years from now
• Offer 2 : ₱500,000 down payment plus ₱12,500 per month for 10 years
Which among the 2 offers should your grandparents choose if the
payment will have an interest of 12% compounded monthly? Find the fair
market value of the two offers.

Example 2: Andy and Rose were recently married and they want to establish a
trust fund that will serve as their savings fund for their future family. After 20
years, ₱1,000,000 will be paid to the couple per year for 10 years. The trust
fund will earn an interest of 6% compounded semi-annually and is to be paid
out semiannually. How much is the present value of this trust fund?

Guide Questions
1. What clues are needed to determine the unknowns in the problem?

2. What are the steps that you need in solving for the market value?
 DEPARTMENT OF EDUCATION
DIVISION OF ANTIQUE
AURELIANA NATIONAL HIGH SCHOOL
AURELIANA, PATNONGON, ANTIQUE

Answer Keys

1. Php 21, 064.81

2. Php 5, 605.01