Deferred Annuity

Deferred Annuity – a type of annuity where the first payment is

made several periods after the beginning of annuity.
𝐧
–𝐦
𝐧
Deferred
Annuity n
–m
n

Where:
P = value or sum of money at present
F = value or sum of money at some future time
A = series of periodic equal amount of payments
i = interest rate per interest period
n = number of interest periods/number of equal payments
m = number of interest periods when there is no payment made
Deferred Annuity

A. Present Worth
5
P1 =A

P1
P= 3
Deferred Annuity

B. Future Worth
n
F= n

F= F2(1 + i)nT
Annuities
Deferred Annuity

Example 1:
A boy is entitled to 10 yearly endowments of P30,000 each
starting at the end of the eleventh year from now. Using an
interest rate of 8% compounded annually, what is the value of
these endowment now?
Ans. P= P93,241.98, m=10 years: n=10 years; A=30,000

1
Annuities
Deferred Annuity

Example 2:
A parent on the day that child is born wishes to determine
what lump sum would have to be paid into an account bearing
interest of 5% compounded annually, in order to withdraw P
20,000 each on the child’s 18th, 19th , 20th and 21th birthdays?
Ans. P 30,941.73
You need P4000 per year to go to
college. Your father invested P5000 in
7% account for your education when
you were born. If you withdraw P4000
at the end of your 17th,18th,19th, and
20th birthday. How much money will
be left in the account at the end of
the 21st year?

Ans:1699.86 S=P(1+i)^n : p=annuity+

future annuity (ordinary)
Annuities
Deferred Annuity

Example 4:
A man invested P100,000 every end of the year for 10 years,
then waited for another 10 years for his money to grow. If his
investments earned 8% after tax compounded annually, what
would be the sum of his investments and earnings at the end
of the 20th year in pesos.
Ans. P 3,127,540.18
n=6 years
nT=10 years