ANNUITY

Annuity –a sequence of payments made at equal

(fixed)intervals or periods of time
 Five Types of Annuity
1. SIMPLE ANNUITY
Interest conversation or compounding period is equal or the same as
the payment interval.
Example: If you’re paying monthly, interest is also monthly.

2. GENERAL ANNUITY
Interest conversion or compounding period is unequal or not the same
as the payment interval.
Example: If you’re paying monthly, interest can be added quarterly or annually.
If you’re paying annually, interest can be monthly.
3. ORDINARY ANNUITY
Annuity in which the periodic payment is made at the END of each
payment interval

4. ANNUITY DUE
An annuity in which the periodic payment is made at the BEGINNING
of each payment interval

5. DEFERRED ANNUITY
The periodic payment is not made at the beginning nor at the end of
each payment interval, but some later date
Rose works very hard because she wants to have enough money in her
retirement account when she reaches the age 60. She wants to withdraw
26,000.00PHP at the end of every 3 months for 20 years starting 3 months
after she retires. How much must Rose deposit at retirement at 12% per
year compounded quarterly for the annuity?
Regular Payment (P) = PHP26,000
At the end of every 3 months (quarterly)
Simple Annuity
Rate (r) = 12%
Ordinary Annuity
No. of Conversions = quarterly = 4 (K)
Time in years (t)= 20 years
SIMPLE ORDINARY
PRESENT VALUE???? ANNUITY
Suppose Mr. and Mrs. Mendoza deposited 20,000.00php at the beginning of
each year for 5 years in an investment that earns 10% per year compounded
annually, what is the amount or future value of the annuity?

Regular Payment (P) = PHP20,000

Every beginning of the year (annually)
Simple Annuity
Rate (r) = 10%
Annuity Due
No. of Conversions = annually = 1 (K)

Time in years (t)= 5 years

SIMPLE ANNUITY
FUTURE VALUE???? DUE
Aldous obtained a loan of 50,000.00php for the tuition fee of her son. She
must repay the loan by equal payments at the end of every six months for 3
years at 10% interest compounded semi-annually. Find the periodic
payment.

Present Value (PV) = PHP50,000

At the end of every six months (semi - annually)
Simple Annuity
Rate (r) = 10%
Ordinary Annuity
No. of Conversions = semi annually = 2 (K)

Time in years (t)= 3 years SIMPLE ORDINARY

ANNUITY
REGULAR
Find the present value of an ordinary annuity of 2,000.00php payable
annually for 9 years if the money is worth 5% compounded quarterly.

Regular Payments (P) = PHP2,000

At the end of every year (annually)

General Annuity
Rate (r) = 5%
Ordinary Annuity
No. of Conversions = quarterly= 4 (K)

Time in years (t)= 9 years GENERAL

PRESENT VALUE????
ORDINARY
ANNUITY
Micco wants to save 100,000.00php for her first year of college. She
deposits 3,500.00php at the beginning of each month in an account that
earns 4% per year compounded semi-annually. Will Micco have enough
oney saved at the end of 2 years?

Regular Payments (P) = PHP3,500

At the beginning of each month (monthly)

General Annuity
Rate (r) = 4%
Annuity Due
No. of Conversions = semi – annually = 2 (K)

Time in years (t)= 2 years

GENERAL ANNUITY
FUTURE VALUE???? DUE
Mr. and Mrs. Toledo will need 300,000.00php in 2 years to start their own
business. They plan t save money by making monthly deposits at the end of
each month in an account earning 8% per year compounded quarterly. How
much must they make monthly?

Future Value (FV) = PHP300,000.00

At the end of each month (monthly)
General Annuity
Rate (r) = 8%
Ordinary Annuity
No. of Conversions = quarterly = 4 (K)

Time in years (t)= 2 years

GENERAL
REGULAR ORDINARY
Find the present value of 10 semi-annual payments of 2,000.00 each if the
first payment is due at the end of 3 years and money is worth 8%
compounded semi-annually.

Regular Payment (P) = PHP2,000 Semi Annual Payment (2)

Rate (r) = 8% No. of Conversions = semi - annually = 2 (K)

PRESENT VALUE???? DEFERRED ANNUITY