GENERAL MATHEMATICS REVIEWER ANNUITIES

 Annuity – a FINANCIAL CONTRACT between a

SIMPLE AND COMPOUND INTEREST person (the annuitant) and an insurance
company (the insurer). It is also a sequence of
 Lender – person or institution who INVESTS the PERIODIC EQUAL PAYMENTS at a REGULAR
money or MAKE THE FUNDS AVAILABLE to the INTERVAL.
borrower.
 Borrower – person or institution who OWES the Note: An annuity is purchased by making either a
money or AVAILS THE FUNDS of the lender. SINGLE LUMP-SUM PAYMENT or a SERIES OF
 Principal – is the amount BORROWED or the PERIODIC PAYMENT.
amount SAVED/INVESTED on the origin date. Additional Note: In annuities, penalties are
Also called the Present Value.
normally applied if funds are withdrawn before a time
o Origin Date – date on which money is specified in the agreement.
received by the borrower.
 Maturity Value – is the PRINCIPAL PLUS the  Present Value of Annuity – is the PRINCIPAL
INTEREST. Also called the Future Value. It is the that must be invested TODAY to provide the
amount that the lender receives from the regular payments of an annuity.
borrower on the maturity date.  Future Value of Annuity – is the TOTAL
o Maturity Date – date on which money ACCUMULATION of the payments and interests
borrowed is to be completely repaid. earned.
 Time – length of time BETWEEN THE ORIGIN  Purpose of Banks – to take funds (DEPOSIT)
AND MATURITY DATE. It is the number of units and lend them to those who need funds (LOAN).
expressed in days, months or years.
 Interest – is the amount PAID or EARNED for Types of Annuity
the use of money.
1. Based on Terms
 Interest Rate – PERCENTAGE of principal
a. Annuity Certain – annuity in
charged by the lender for the use of money.
DEFINITE DURATION.
 Compounding Period “m” – is the TIME
b. Annuity Uncertain – annuity in
INTERVAL when interest is added to the
INDEFINITE DURATION.
principal.
c. Perpetuity – annuity that has a
Period m beginning and CONTINUES
Annually 1 INDEFINITELY.
Semi-annually 2 2. Based on Compounding Period
Quarterly 4 a. Simple Annuity – an annuity
Monthly 12 where the payment interval
Daily 365 (number of annuity) is the SAME
OR EQUAL as the compounding
 Periodic Interest Rate – RATE OF INTEREST period.
for each conversion period. b. General Annuity – an annuity
 Nominal Rate – is the ANNUAL INTEREST where the payment interval
RATE. (number of annuity) is NOT THE
 Frequency of Conversion – NUMBER OF SAME OR NOT EQUAL as the
CONVERSION periods in one year. compounding period.
3. Based on Payment Schedule
Simple Interest Compound Interest a. Ordinary Annuity – annuity in
• Computed based • Computed based which the payment is made at the
on ORIGINAL on ACCRUED END OF EACH PAYMENT INTERVAL.
PRINCIPAL PRINCIPAL. b. Deferred Annuity – annuity that
• Interest is • Interest is NOT the first payment is made AFTER A
CONSTANT in CONSTANT in
CERTAIN PERIOD.
each interest each interest
c. Annuity Due – annuity in which
period. period.
the periodic payment is made at
THE BEGINNING of each payment
interval.
 CONSUMER AND BUSINESS LOANS
 Consumer Loan – a loan given to an individual
for PERSONAL PURPOSES.
o Example: Sheila wants to TOUR
AROUND THE COUNTRY. She obtained a
P100,000 loan from a bank.
 Business Loan – a loan given to an individual
for BUSINESS PURPOSES.
o Example: Kasim borrowed money from
a cooperative group to buy equipment
for his VULCANIZING SHOP.
 Collateral – assests used to secure the loan.
 Mortgage – a loan secured by collateral, that
the borrower is obligated to pay at specified
terms.
LOGIC
 Proposition – a DECLARATIVE SENTENCE that
can be classified as true or false, but not both.
 Simple Proposition – a simple statement
expressing a single complete thought.
 Compound Proposition – a proposition formed
by two connecting two or more propositions.
 Connectives or Logical Connectives – the
words and phrases (or symbols) used to form
compound PROPOSITIONS or used to COMBINE
PROPOSITIONS.
Note: We use the lowercase (sometimes uppercase)
letters p, q, and r to denote SIMPLE PROPOSITIONS.
Connective (Word) Symbol
Not ~
And ^
Or v 3.
If-then → company if it is to be liquidated.
If and only if  Additional Notes:
ADDITIONAL TERMS:
 Stocks – shares in the OWNERSHIP of a
company or corporation.
 Dividends – shares in the PROFIT of a company.
 Dividend per share – RATIO OF THE
DIVIDENDS to the number of shares.
 Stock Market – a PLACE where stocks can be
bought or sold.
 Par value – the PER SHARE AMOUNT as stated
on the company certificate.
 Market Value – the CURRENT PRICE OF A
STOCK at which it can be sold.
 Stock Certificate – a PAPER ISSUED TO A
SHAREHOLDER which shows on its face the
number of shares it represents.
 Shareholder or Stockholder – one who OWNS
SHARES of corporation stock.
 Philippine Stock Exchange (PSE) – is the
corporation that GOVERNS our LOCAL stock
market.
 Price Increase – is an INCREASE in the market
price of your stock over time.
Note: Once you buy or invest in a stock, you now
become PART OWNER or a SHAREHOLDER of that
particular corporation.
As a stockholder, an investor is entitled to the
following BENEFITS:
1. VOTING rights;
2. Dividends to be declared by the COMPANY;
and
Share of the REMAINING ASSETS of the

1. Profitable corporations can also issue

Examples:
dividends, whether in cash or in additional
Let: P: It is raining. shares of stock as a means for shareholders
Q: It is flooding. to share in their distributed profits.
R: There is a typhoon 2. To BUY stocks, you need the ASSISTANCE
OF A STOCKBROKER who is licensed to
1. PVQ purchase securities on your behalf.

It is raining or it is flooding.

2. R→P

If there is a typhoon, then it is raining.

3. ~Q^~P

It is not flooding and it is not raining.

 IMPORTANT FORMULAS

SIMPLE INTEREST

I=PxRxT
F = P(1 + RT)

Where: I = Interest (Simple)

P = Principal or Present Value
F = Maturity of Future Value
R = Rate of Interest (%)
T = Time (in years)

COMPOUND INTEREST

I=F–P
F = P(1+i)n

log (F÷P)
t= r
m log (1+ )
m

n F
r = m ( √ - 1)
P

Where: I = Interest (Compound)

P = Principal or Present Value
F = Maturity of Future Value
i =r/m
n=mxt
t = time (in years)
m = compounding period (Table on Page 1)
r = rate of interest

SIMPLE ANNUITY
n
(1+i) -1
F = R[ ]
i
-n
1-(1+i)
P = R[ ]
i

Where: R = Amount of each payment

P = Principal or Present Value
F = Maturity of Future Value
i =r/m
n=mxt
t = time (in years)
m = compounding period (Table on Page 1)
r = rate of interest