SIMPLE ANNUITY

Prepared By : Aizilyn Capillanes & Steven Legaspi

Grade 11 ABM
Mrs. Roumelia Domion
 ANNUITY– a sequence of payments made at
equal(fixed) intervals or periods of time.

Annuities may be classified in different ways, as

follows.
 ANNUITIES
According to payment Simple Annuity- an annuity
interval and interest period where the payment
interval is the same as the
interest period
According to time of Ordinary Annuity (or Annuity
payment Immediate) – a type of
annuity in which the
payments are made at the
end of each payment
interval
According to duration Annuity Certain– an annuity
in which payments begin
and end at definite times
General Annuity - an
annuity where the
payment interval is not the
same as the interest period
Annuity Due – a type of
annuity in which the
payments are made at
beginning of each payment
interval
Contingent Annuity – an
annuity in which the
payments extend over an
indefinite (or indeterminate)
length of time
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 the 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
 TIME DIAGRAM

Time Diagram for an n-Payment Ordinary Annuity

R R R R R … R

0 1 2 3 4 5 n
Example 1
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? Given: periodic payment R =
P3,000 term t = 6 months interest rate per
annum i(12) = 0.09 number of conversions
per year m = 12 interest rate per period j =
12 .0 09 = 0.0075 Find: amount (future
value) at the end of the term, F
Add all the future values obtained from the
previous step.

Thus, the amount of this annuity is P18,340.89