Department of Education – Division of Cavite Province

TANZA NATIONAL TRADE SCHOOL

Tanza, Cavite

General Mathematics

Prepared by:
JAY MAR R. MACUHA
Subject Teacher
Lesson 5:
SIMPLE AND
GENERAL
ANNUITIES (Intro)
Annuity

a sequence of
payments made at
equal (fixed
intervals or periods
of time.
 Each payment in an annuity is called theperiodic
payment (R).

 The time between the successive payments dates

of an annuity is called thepayment interval.

 The time between the first payment interval and

last payment interval is calledterm of the annuity (t)
.
 The sum of the future values of all the
payments to be made during the entire term of
future value or the amount of
the annuity is the
an annuity (F).

 The sum of the present values of all payments

to be made during the entire term of the
present value of an
annuity is called the
annuity (P)
Lesson 5:
SIMPLE AND
GENERAL
ANNUITIES (Intro)
Name the picture!
_ _ _ _R_ _ _ _
INSURANCE
_ _ _ _ _ _ C_ _D
CREDIT CARD
______S
GADGETS
A_ _ _ _ _ _ _ _ _
APPLIANCES
_ _V_ _ _ _ _ _T_
INVESTMENTS
Annuity

a sequence of
payments made at
equal (fixed
intervals or periods
of time.
The following are examples of
annuities:
Rental payment Monthly pensions
Monthly payment for car Educational plan
loan
Ex:
A series of regular payments of
₱23,000 every six months with an
interest rate of 5% compounded
annually.
 Ex:
• Life insurance premiums that are
Ex: being paid as long as the insured is
A series of payments made to amortize a car or living.
house. • Pension payments that continue
Monthly house rent payment until the person dies.
 Annuity Due the regular
payment is made at the
beginning of the
payment interval

Deferred Annuity -an

annuity in which the
periodic payment is not
made at the beginning
nor at the end of each
payment interval but at a
certain time in the future
Ex:
Monthly payments of ₱3,000 for 3 years
that will start 7 months from now (with
period of deferral of 6 periods).
Ex:
• If the term of an annuity is
one year, which begins on
January 1, and the payment
interval is one quarter, the
first payment should be on
January 1 (beginning of the
1st quarter).
Ex:
If the term of an annuity is one year,
which begins on January 1, and the
payment interval is one quarter, the first
payment should be on April 1 (end of the
1st quarter).
 Each payment in an annuity is called theperiodic
payment (R).

 The time between the successive payments dates

of an annuity is called thepayment interval.

 The time between the first payment interval and

last payment interval is calledterm of the annuity (t)
.
 The sum of the future values of all the
payments to be made during the entire term of
future value or the amount of
the annuity is the
an annuity (F).

 The sum of the present values of all payments

to be made during the entire term of the
present value of an
annuity is called the
annuity (P)
 Annuities may be illustrated using a time diagram.

The time diagram for an ordinary annuity is given

below.

0 1 2 n-1
n

R
R(1+i)
Example 1. ₱ 50,000 deposited every year for 5
years at 8% per year compounded annually.

(1) Illustrate the cash flow in a time diagram.

(2) Find the future value of all the payments at
the end of term (t=5)
(3) Add all the values obtained from the previous
step.
ACTIVITY 5: Cash flow in the time diagram (Simple
Annuity)

PROBLEM: Suppose Mrs. Remoto Would like to save P3,000

every month in a fund that gives 9% compounded monthly.
How much is the amount or future value of her savings after
6 months?
(1) Illustrate the cash flow in a time diagram.
(2) Find the future value of all the payments at the end of
term (t=6)
(3) Add all the values obtained from the previous step.