ANNUITIES

Is a series of equal payment occurring at equal periods of

time
Types of Annuities

 Ordinary Annuity – is where the payments are made at the

end of each period.
 Deferred Annuity – is where the first payment is made
several periods after the beginning of the annuity.
 Annuity Due – is where the payments are made at the
beginning of each period.
 Perpetuity – an annuity in which the payments continue
indefinitely.
 Types of Annuities
 Ordinary Annuity –

 Deferred Annuity –

 Annuity Due –

 Perpetuity –
 Types of Annuities

i = interest per period A = uniform payment / Annual Worth

r = nominal interest P = Present Worth
m = number of period per year F = Future Worth
n = number of years
 Types of Annuities

[ 1+𝑖 𝑛 −1] 1+𝑖 𝑛 −1

 Ordinary Annuity 𝑃 = 𝐴 𝐹 =𝐴[ ]
1+𝑖 𝑛 (𝑖) 𝑖
[1− 1+𝑖 −𝑛 ] −𝑚 1+𝑖 𝑛 −1
 Deferred Annuity 𝑃 = 𝐴 1+𝑖 𝐹 =𝐴[ ]
(𝑖) 𝑖
[ 1+𝑖 𝑛 −1] 1+𝑖 𝑛 −1
 Annuity Due 𝑃=𝐴+ 𝐴 𝐹 =𝐴[ ](1 + 𝑖)
1+𝑖 𝑛 (𝑖) 𝑖
𝐴
 Perpetuity 𝑃=
𝑖
 Ordinary Annuity
Ex. What are the present worth and the accumulated amount of a 10-year annuity paying Php 10,000 at
the end of each year, with interest at 15% compounded annually?
 Ordinary Annuity
Ex. What is the present worth of Php 500 deposited at the end of every three months for 6 years of the
interest rate is 12% compounded semiannually?
 Ordinary Annuity
Ex. A chemical engineer wishes to set up a special fund by making uniform semiannual end-of-period
deposits for 20 years. The fund is to provide Php 100,000 at the end of each of the last five years of the 20-
year period. If the interest is 8% compounded semiannually, what is the required semiannual deposit to be
made?
 Deferred Annuity
Ex. If Php 10,000 is deposited each year for 9 years, how much annuity can a person get annually from the
bank every year for 8 years starting 1 year after the 9th deposit is made. Cost of money is 14%.