Annuity is a sequence

of payments made at
equal or fixed
intervals or periods of
time.
Examples of Annuities
Rental payment
Monthly pensions
Monthly payment for
loan
Life Insurance
 Not Examples of
Annuities
Water/Electric Bills
House, car, lot, etc.
purchased in full
payment
Grocery Expenses
 Types of Annuities
According to Simple Annuity is an annuity General Annuity is an annuity
payment interval where the payment interval is the where the payment interval is not
same as the interest period. the same as the interest period.
and interest period
Ordinary Annuity or Annuity Annuity Due is a type of
According to time Immediate is a type of annuity in annuity in which the payments are
of payment which the payments are made at
the end of each payment interval
made at the beginning of each
payment interval.

Contingent Annuity is an
According to Annuity Certain is an annuity annuity in which payments extend
in which payments begin and end over an indefinite (indeterminate)
duration at definite times. length of time.
 Important Terms
Periodic or Regular
payment each payment in an annuity

Payment interval or the time between the

Payment Frequency successive payment dates of
an annuity
Interest Period or the time intervals between
Compounding when the interest is added to
Frequency the account
 Important Terms
Term of the the time between the first payment
annuity interval and last payment interval.

Future value or the sum of the future values of all

the amount of an the payments to be made during
annuity the entire term of the annuity.

Present value of the sum of the present values of all

payments to be made during the
an annuity entire term of the annuity
 Example 1
A deposit of ₱5,500.00
was made at the end of
each year to an
account that earns 5.6%
interest compounded
annually for 3 years.
 Example 2
Mrs. Credo would like to save
₱3,000.00 every month in a
fund that gives 9%
compounded semi-annually.
How much is the amount or
the future value of her savings
after 6 months?
 Example 3
Rose wants to withdraw
₱36,000.00 every 3 months for 20
years after she retires. How much
must Rose deposit at retirement
at 12% per year compounded
quarterly for the annuity?
 ADVERB OF DEFINITE
FREQUENCY
(Adverb of Time)
Daily = everyday/each day
Monthly = every month
Quarterly = every 3 months
Semi-annually = twice a year/ every 6 months
Annually = every year/ once a year/ each year
Biannually = once every two years
 Example 4
James deposited
₱ 50,000 every year
for 5 years at 8%
per year
compounded
Cash flow using Time
Diagram
Amount of the Annuity
 What formula are you going
to apply to determine the
amount or future value of an
annuity?
Compound Interest Formula:
A=P
where: A = Amount or Maturity Value
P = Principal amount
n = number of years
i = interest rate