Lesson 5 - Annuity Due

Engr. Brylle Reovince Rosales

MITL
 Annuity Due ()
• Annuity in which periodic payment () is made at the beginning
of each payment interval
• The term of an A-due covers the time from beginning of the
first payment period up to the one end of the last payment
period.
• The present value of A-due or is the value on the day of the
first payment
• Ordinary annuity of
• The amount of A-due or the value at the end of the term, is the
sum of the accumulated value of the payments at the end of the
term.
• Ordinary annuity of
Finding F when given A

F
A

0 1 2 3 4 5 n-1 n

 (1  i ) n 1  1 
F  A  1
 i 
Finding P when given A
P

0 1 2 3 4 5 n-1 n

1  (1  i )  n 1 
P  A  1
 i 
Example 4.7 (Sullivan, 2006)

Eight annual deposits of $1,500 were made at the

beginning of each year in an account that pays 10%
compound interest.
a.What will be the accumulated amount at the end of eight
years?
b.What is the present worth of the deposits?
 SOLUTION
P $1,500 F
a)

b) 0 1 2 3 4 5 6 7 8
P
 ALTERNATIVE SOLUTION

a) Solve for F7 then solve for F8. P $1,500 F7 F8

0 1 2 3 4 5 6 7 8
ALTERNATIVE SOLUTION

b) Use F8 to solve for P0. P0 $1,500 F7 F8

0 1 2 3 4 5 6 7 8
Example 4.8 (Sullivan, 2006)
Sarah wants to have $10,000 on her
account at the end of 5 years. If she plans
to place it on a bank having an interest rate
of 5% compounded annually and make
deposits at the beginning of each year,
what should be her annual deposits?
Heart wants to buy a computer set
within a year. She decides to make
regular deposits of P3,000 at the
start of every month, her money
earning 5% compounded monthly.
How much will she have in her
savings a year after?
How much should be invested in a
fund at the beginning of each year
in order to accumulate P80,000 at
the end of 10 years if the fund is
invested at 5% converted annually?
Find the cash equivalent of an
item that was purchased for
P18,000 down payment and
P2,500 at the beginning of each
six months for 3½ years, if
interest is 5½ % compounded
semi-annually.
Nette bought a brand new car.
What is the cash price of the car if
she has to make 36 quarterly
payments of P22,000 at the
beginning of each quarterly period
at 10.5% compounded quarterly?
Assignment 4
1. Tonio wants to have P95,000 for his traveling expenses
four years from now. How much must he save at the
beginning of each quarter starting now, if he gets 6%
compounded quarterly interest on his savings?

2. How much should Analyn deposit at the beginning of

every three months if the bank pays 12% compounded
quarterly to have a total amount of P416,085 after
three years?

Due date: 1/16/2023 1:00PM

How much should Analyn deposit at
the beginning of every three months
if the bank pays 12% compounded
quarterly to have a total amount of
P416, 085 after three years?
The annual premium on a life
insurance policy is P88,000 payable
in advance. What would be the
monthly premium, if the interest
rate is based on 9% compounded
monthly?
In purchasing a high quality handy
camera, the buyer agreed to pay
P9,375 at the beginning of each 6
months for 8 years, with the first
payment due on the date of
purchase. If the interest rate is
19.5% converted semiannually, find
the cash price of the camera.
Seat Work:
1.) A loan of P500,000 was signed by Liza
who promised to pay it at the
beginning of each month for 5 years. If
money is worth 12% compounded
monthly, what will be the total sum
paid by Liza?

2.) How much should Robert pay at the

beginning of every six months at 10%
compounded semi – annually to
accumulate P298, 085 for 8 years?