KIDAPAWAN CITY DIVISION

KIDAPAWAN CITY NATIONAL HIGH SCHOOL

SENIOR HIGH SCHOOL DEPARTMENT

SIMPLIFIED SELF-LEARNING MODULE IN GENERAL MATHEMATICS

Simple and General Annuities
Quarter 2 Module 3

Name: ___________________________________________ Grade and Section: __________________

School: __________________________________________ LRN: _____________________________
Subject Teacher: __________________________________

I. OBJECTIVES
1. Illustrate simple and general annuities. M11GM-IIc-1
2. Distinguish between simple and general annuities. M11GM-IIc-2
3. Find the future value and present value of both simple annuities and general annuities. M11GM-IId-1

II. SUBJECT MATTER/ TOPIC AND CURRICULUM GUIDE

a. Content Standard: Key Concepts of Simple and General Annuities
b. Performance Standard: Investigate, analyze & solve problems involving simple and general annuities.
c. References: Teaching Guide for SHS Gen Math pp.199-227, Gen Math Learner’s Material pp.168-198

III. PROCEDURE

Annuity

Annuities have been used in our society. The knowledge of annuity applies to regular investment for a
goal, loans, retirement plan, educational plan, amortization and saving money. Payments by installment are done
periodically, and in equal amounts. This payment scheme is called annuity.

Classification of Annuity

Annuities
Simple Annuity General Annuity
An annuity where the payment interval An annuity where the payment interval
According to payment is the same as the interest period. is NOT the same as the interest
interval and interest Example: A deposit of Php 2000 was period.
period. made at the end of each month to an Example: Installment payments are
account that earns 5% interest made at the end of each month for a
compounded monthly. loan that charges 1.05% interest
compounded annually.
Ordinary Annuity (or Annuity Annuity Due
According to time of Immediate) A type of annuity in which the
payment A type of annuity in which the payments are made at beginning of
payments are made at the end of each each payment interval.
payment interval.
Annuity Certain Contingent Annuity
An annuity in which payments begin An annuity in which the payments
According to duration and at definite times. extend over an indefinite (or
Example: A loan payable of Php indeterminate) length of time.
10,000 at the end of the month for 2 Example. Life insurance, pension
years. payments

Definition of Terms:
• Annuity – a sequence of payments made at equal (fixed) intervals or periods of time.
• Payment Interval – the time between successive payments.
• Term of an annuity, t – time between the first payment interval and last payment interval.
• Regular or Periodic payment, R – the amount of each payment.
• Amount (Future Value) of an annuity, F – sum of future values of all the payments to be made
during the entire term of an annuity.
• Present value of an annuity, P – sum of present values of all the payments to be made during the
entire term of the annuity.
• Cash Value or Cash Price – down payment (if there is any) plus present value of the annuity.

SSLM Writers:
Lavin S. Blanco, Jennylee V. Pun-an, Jeasza May Claire J. Porras
Nixon B. Barrete, Nicanor D. Butal, Edmund H. Hernandez
General Mathematics
Grade-11
Page 1 of 6
 Time Diagram for Simple and General Annuities

Simple Annuity
P F
R R R R R … R
0 1 2 3 4 5 … n
F = future value P = present value
R = regular payment n = number of payments

Simple Annuity

Example 1. Suppose Mrs. Remoto would like to save Php 3,000 at the end of each month, for six months, in a
fund that gives 9% compounded monthly. How much is the amount or future value of her savings
after 6 months?
Solution:
Given: regular payment 𝑅 = 𝑃ℎ𝑝 3000 Find: F
term 𝑡 = 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑟 0.5 𝑦𝑒𝑎𝑟
interest rate per annum 𝑖 12 = 0.09
number of conversions per year 𝑚 = 12
0.09
interest rate per period 𝑗 = 12 = 0.0075

Illustration of the cash flow in a time diagram:

3000 3000 3000 3000 3000 3000

0 1 2 3 4 5 6

Finding the future value of all the payments at the end of the term (𝑡 = 0.5 𝑦𝑒𝑎𝑟):

3000 3000 3000 3000 3000 3000

0 1 2 3 4 5 6

3000
Note: Recall the formula
of the future value of 3000(1 + 0.0075)1
compounding more than 3000(1 + 0.0075)2
once a year. 3000(1 + 0.0075)3
3000(1 + 0.0075)4
3000(1 + 0.0075)5
Add all the future values obtained from the previous step:
3000 = 3,000.00
3000(1 + 0.0075)1 = 3,022.50 Note: Unless mentioned
3000(1 + 0.0075)2 = 3,045.169 otherwise, all annuities discussed
3000(1 + 0.0075)3 = 3,068.008 in this lesson are ordinary
3000(1 + 0.0075)4 = 3,091.018 annuities. That is, the regular
3000(1 + 0.0075)5 = 3,114.20 payments are assumed to be done
at the end of the payment period.
F = 18,340.89

Amount (or Future Value) of an Ordinary Annuity

(𝟏+𝒋)𝒏 −𝟏 where, R is the regular payment

𝑭=𝑹 j is the interest rate per period
𝒋
n is the number of payments

Example 2. In order to save for her high school graduation, Marie decided to save P 200 at the end of each
month. If the bank pays 0.25% compounded monthly, how much will her money be at the end of 6
years?
Solution:
Given: 𝑅 = 𝑃ℎ𝑝 200
𝑡 = 6 𝑦𝑒𝑎𝑟𝑠
𝑖 12 = 0.0025 (1 + 𝑗)𝑛 − 1
𝐹=𝑅
𝑚 = 12 𝑗
0.0025 0.0025 72
𝑗= (1 + ) −1
12 12
𝑛 = 𝑚𝑡 = (12)(6) = 72 𝐹 = 200 0.0025
12
Find: F 𝑭 = 𝑷𝒉𝒑 𝟏𝟒, 𝟓𝟎𝟕. 𝟎𝟐

Hence, Marie will be able to save P14,507.02 for her graduation.

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Example 3. Suppose Mrs. Remoto would like to know the present value of her monthly deposit of Php 3,000
when the interest is 9% compounded monthly. How much is the present value of her savings at the
end of 6 months?
Solution:
Given: regular payment 𝑅 = 𝑃ℎ𝑝 3000 Find: P
term 𝑡 = 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑟 0.5 𝑦𝑒𝑎𝑟
interest rate per annum 𝑖 12 = 0.09
number of conversions per year 𝑚 = 12
0.09
interest rate per period 𝑗 = 12 = 0.0075

Discount the payment of each period to the beginning of the term – that is, find the present value
of each payment. Recall the formula:

3000 3000 3000 3000 3000 3000

0 1 2 3 4 5 6

3000(1 + 0.0075)−1
3000(1 + 0.0075)−2
3000(1 + 0.0075)−3
3000(1 + 0.0075)−4
3000(1 + 0.0075)−5
3000(1 + 0.0075)−6

Add all discounted payments to get the present value:

3000(1 + 0.0075)−1 = 2,977.667
3000(1 + 0.0075)−2 = 2,955.501
3000(1 + 0.0075)−3 = 2,933.50
3000(1 + 0.0075)−4 = 2,911.663
3000(1 + 0.0075)−5 = 2,889.988
3000(1 + 0.0075)−6 = 2,868.474
P = 17,536.79

Thus, the cost of the TV set at the beginning of the term is Php 17,536.79.

Present Value of an Ordinary Annuity

𝟏−(𝟏+𝒋)−𝒏 where, R is the regular payment

𝑷=𝑹 j is the interest rate per period
𝒋
n is the number of payments

Example 4. Mr. Ribaya paid Php 200,000 as down payment for a car. The remaining amount is to be settled by
paying Php 16,200 at the end of each month for 5 years. If interest is 10.5% compounded monthly,
what is the cash price of his car?
Solution:
Given: 𝑅 = 16,200
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
𝑖 12 = 0.105 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
𝑚 = 12 𝑗
0.105 0.105 −60
𝑗= 1 − (1 + )
12
12 𝑃 = 16200 [ 0.105
]
𝑛 = 𝑚𝑡 = (12)(5) = 60 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 12

Find: cash value 𝑷 = 𝑷𝒉𝒑 𝟕𝟓𝟑, 𝟕𝟎𝟐. 𝟐𝟎

Cash value = Down Payment + Present Value
= 200,000 + 753,702.20
= Php 953,702.20

The cash price of the car is Php 953,702.20.

Activity 1. Solve the following problems:

1. Peter started to deposit P5,000 quarterly in a fund that pays 1% compounded quarterly.
How much will be in the fund after 6 years?

2. How much should be invested in a fund each year paying 2% compounded annually to
accumulate P100,000 in 5 years?

Page 3 of 6
Transformed Formulas for Finding R (regular payment) in an annuity

𝑷 𝑭
𝑹= 𝟏−(𝟏+𝒋)−𝒏
and 𝑹= (𝟏+𝒋)𝒏 −𝟏
𝒋 𝒋

General Annuity

Example 5. Mel started to deposit P1,000 monthly in a fund that pays 6% compounded quarterly. How
much will be in the fund after 15 years?
Solution:
Given: 𝑅 = 𝑃ℎ𝑝 1000
𝑚1 = 12 (payment interval)
𝑛 = 𝑚𝑡 = (12)(15) = 180 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑖 4 = 0.06
𝑚2 = 4 (interest period)
Find: F

The cash flow for this problem is shown in the diagram below.
F
1,000 1,000 1,000 …_____1,000_ 1,000
0 1 2 3 … 179 180

Since payments are monthly, the interest rate of 6% compounded quarterly must be converted to its
equivalent interest rate that is compounded monthly. Recall the lesson on equivalent rates.

𝐹1 = 𝐹2
𝑖𝑚 𝑚 𝑖𝑚 𝑚
(1 + ) = (1 + )
𝑚 𝑚
12
𝑖 12 0.06 4
(1 + ) = (1 + )
12 4
1 1
12( )
𝑖 12 12 0.06 4(12)
(1 + ) = (1 + )
12 4
1
𝑖 12
𝑗= = (1.015)3 − 1
12
𝒊𝟏𝟐
𝒋 = 𝟏𝟐 = 𝟎. 𝟎𝟎𝟒𝟗𝟕𝟓𝟐𝟎𝟔𝟐𝟕𝟑
Thus, the interest rate per monthly payment interval is 𝟎. 𝟎𝟎𝟒𝟗𝟕𝟓𝟐𝟎𝟔𝟐𝟕𝟑 or 𝟎. 𝟒𝟗𝟕𝟓𝟐𝟎𝟔𝟐𝟕𝟑%.

Apply the formula in finding the future value of an ordinary annuity using the equivalent rate.
(1 + 𝑗)𝑛 − 1
𝐹=𝑅
𝑗
(1 + 0.004975206273)180 − 1
𝐹 = 1000
0.004975206273
𝑭 = 𝑷𝒉𝒑 𝟐𝟗𝟎, 𝟎𝟖𝟐. 𝟒𝟎
Example 6. A teacher saves P5,000 every 6 months in a bank that pays 0.25% compounded monthly. How
much will be her savings after 10 years?
Solution:
Given: 𝑅 = 5000
𝑚1 = 2 (payment interval) note: every 6 months means twice a year
𝑛 = 𝑚𝑡 = (2)(10) = 20 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑖 12 = 0.0025
𝑚2 = 12 (interest period)
Find: F

Convert each semi-annual payment interval to its Apply the formula in finding the future
equivalent rate of 0.25% compounded monthly. value of an ordinary annuity using the
𝐹1 = 𝐹2 equivalent rate.
2 12
𝑖2 𝑖 12
(1 + 2 ) = (1 + ) (1 + 𝑗)𝑛 − 1
12 𝐹=𝑅
2( )
1 1 𝑗
𝑖2 2 0.0025 12(2) 20
(1 + 2 ) = (1 + ) (1 + 0.001250651223) −1
12 𝐹 = 5000
𝑖2 0.0025 6 0.001250651223
𝑗= 2
= (1 + 12
) −1
𝑭 = 𝑷𝒉𝒑 𝟏𝟎𝟏, 𝟏𝟗𝟕. 𝟎𝟖
𝒊𝟐
𝒋= = 𝟎. 𝟎𝟎𝟏𝟐𝟓𝟎𝟔𝟓𝟏𝟐𝟐𝟑
𝟐

Page 4 of 6
 Example 7. Ken borrowed an amount of money from Kat. He agrees to pay the principal plus interest by
paying P38,973.76 each year for 3 years. How much money did he borrow if interest is 8%
compounded quarterly?
Solution:
Given: 𝑅 = 𝑃38,973.76
𝑚1 = 1 (payment interval) note: annually payment
𝑛 = 𝑚𝑡 = (1)(3) = 3 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑖 4 = 0.08
𝑚2 = 4 (interest period)
Find: P

Convert each annual payment interval to its Apply the formula in finding the present
equivalent rate of 8% compounded quarterly. value of an ordinary annuity using the
𝐹1 = 𝐹2 equivalent rate.
1 4
𝑖1 𝑖4
(1 + 1 ) = (1 + 4 ) 1 − (1 + 𝑗)−𝑛
𝑃=𝑅
𝑖1 0.08 4 𝑗
(1 + 1 ) = (1 + ) −3
4 1 − (1 + 0.08243216)
𝑖1 0.08 4 𝑃 = 38,973.76
𝑗= = (1 + ) −1 0.08243216
1 4
𝒊𝟏 𝑷 = 𝑷𝒉𝒑 𝟏𝟎𝟎, 𝟎𝟎𝟎. 𝟎𝟎
𝒋= = 𝟎. 𝟎𝟖𝟐𝟒𝟑𝟐𝟏𝟔
𝟏
Hence, Ken borrowed 100,000 from Kat.

Activity 2. Solve the following problems.

1. On a girl’s 10th birthday, her father started to deposit P5,000 quarterly at the end of each term in a
fund that pays 1% compounded monthly. How much will be in the fund on his daughter’s 17 th
birthday?

2. The buyer of a lot pays P10,000 every month for 10 years. If money is 8% compounded annually,
how much is the cash value of the lot?

IV. ASSESSMENT

Multiple Choice: Choose the letter of the correct answer.

_____ 1. What is called a sequence of payments made at equal time periods?

A. annuity B. compounding C. investment D. regular payment

_____ 2. What is an annuity where payment interval is the same as the interest period?
A. annuity certain B. general annuity C. ordinary annuity D. simple annuity

_____ 3. Which of the following is an example of general annuity?

A. pension payments
B. monthly deposit that earns monthly interest
C. quarterly investment that earns annual interest
D. monthly payments of health insurance for 6 years

_____ 4. What is an annuity where the payments are made at the end of each payment interval?
A. annuity certain B. contingent annuity C. ordinary annuity D. simple annuity

_____ 5. In an annuity, what term is referred to the amount of each payment in a given interval?
A. cash value B. down payment C. regular payment D. term of an annuity

For items 6–9, refer to the problem:

“A P50,000 loan is payable in 3 years. To repay the loan, the debtor must pay an amount every 6 months with
an interest rate of 6% compounded semi-annually.”

_____ 6. How many payments would the debtor pay?

A. 3 B. 6 C. 9 D. 18

_____ 7. What is the interest rate per period?

A. 0.6% B. 1% C. 3% D. 6%

_____ 8. How much should a debtor pay every 6 months?

A. P8,322.37 B. P9,229.88 C. P9,876.33 D. P10,062.23

_____ 9. Calculate the total interest of a loan.

A. P4,983.63 B. P5,379.28 C. P9,257.98 D. P10,373.38

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For items 10–12, refer to the problem:
“The buyer of a car pays P169,000 cash and P12,000 every month for 5 years and money is 10% compounded
monthly.”

_____ 10. Solve for the present value of the monthly deposits for 5 years.
A. P564,784.43 B. P586,655.77 C. P621,182.52 D. P631,255.96

_____ 11. What is the cash price of the car?

A. P733,784.43 B. P755,655.77 C. P790,182.52 D. P800,255.96

_____ 12. Calculate the total payment for the car.

A. P720,000 B. P889,000 C. P920,000 D. P1,089,000

For items 13–15, refer to the problem:

“Teacher Kaye is saving P2,000 every month by depositing it in a bank that gives an interest of 1%
compounded quarterly for 5 years.”

_____ 13. What is the total number of deposits/ payments, n?

A. 5 B. 12 C. 20 D. 60

_____ 14. Solve for j.

A. 0.010037562539 B. 0.10037562539 C. 0.23134562901 D. 0.20037562539

_____ 15. How much will teacher Kaye save in 5 years?

A. P153,542.52 B. P163,536.71 C. P172,221.89 D. P180,872.18

V. ENRICHMENT

Answer the following problems by showing your solutions.

1. Shirly started to deposit P18,000 semi-annually in a fund that pays 5% compounded every six months.
How much will be in the fund after 10 years?

2. Kathrina wants to buy a lot which costs 1 million pesos. She plans to give a down payment of 20% of the
cost, and the rest will be paid by financing at annual interest rate of 12% for 10 years in equal monthly
installments. What will be the monthly payment?

3. To pay for his debt at 12% compounded semi-annually, Ruben committed for 8 quarterly payments of
25,000 each. How much did he borrow?

4. A motorcycle is for sale P60,500 cash or on installment terms 3,000 per month for 2 years at 12%
compounded annually. If you were the buyer, what would you prefer, cash or installment?

KEY TO ANSWERS
𝑷 = 𝐶𝑉 = 𝑷𝒉𝒑 𝟖𝟑𝟒, 𝟑𝟐𝟑. 𝟗𝟎
𝑗
𝑹 = 𝑃ℎ𝑝 19,215.84 𝑃=𝑅
1 − (1 + 𝑗)−𝑛
0.02
(1+0.02)5 −1 12
𝑅= 𝑗= = 0.00643403011
100,000 𝑖 12
𝑗 𝐶𝑉 =? 𝑛 = 𝑚𝑡 = 120
(1+𝑗)𝑛 −1 𝑚1 = 12
𝑅=
𝐹 𝑚2 = 1 𝑡 = 10
𝑅 =? 2. Given: 𝑖 1 = 0.08 𝑅 = 10,000
1
𝑛 = 𝑚𝑡 = (1)(5) = 5 𝑗=
0.02
𝑡=5 𝑚=1 𝑭 = 𝑷𝒉𝒑𝟏𝟒𝟒, 𝟖𝟑𝟑. 𝟏𝟏
𝐹 = 100,000 2. Given: 𝑖 1 = 0.02 𝑗
𝐹 = 5000
(1+𝑗)28 −1
𝑭 = 𝑷𝒉𝒑𝟏𝟐𝟑, 𝟓𝟏𝟒. 𝟎𝟗 𝑗
𝐹=𝑅
4 (1+𝑗)𝑛 −1
0.01 𝐹 = 5000 4
4 = 0.002502083912 𝑗=
(1+ ) −1 𝑖4
0.01 24
𝑗 4 12
𝐹=𝑅 𝑗 = = (1 + ) −1
(1+𝑗)𝑛 −1 0.01 4 𝑖4
12
𝐹 =? 𝐹 =? 𝑗 =? ,
4
𝑛 = 𝑚𝑡 = (4)(6) = 24 𝑗= 𝑛 = 𝑚𝑡 = (4)(7) = 28 𝑚2 = 12
0.01
𝑡=6 𝑖 4 = 0.01 𝑡=7 𝑖 12 = 0.01
𝑚=4 1. Given: 𝑅 = 5,000 𝑚1 = 4 1. Given: 𝑅 = 5,000
Activity 1 Activity 2

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