Section 1 Exercises

Section 1
Find the amount of the following ordinary annuities rounded to the nearest cent. Find the total interest
earned.

Amount of
Ordinary Amount
Time
Annuityof Interest
Each Deposit Deposited Rate (Years) Annuity Earned

1. P 900 annually 5% 18 __________ __________

2. P 2900 annually 8% 5 __________ __________

3. P 7500 semiannually 6% 10 __________ __________

4. P 9200 semiannually 8% 5 __________ __________

5. P 3500 quarterly 10% 7 __________ __________

Find the present value of the following annuities. Round to the nearest cent
Amount per Payment at Time Rate of Present
Payment End of Each (Years) Investment Compounded Value

1. P 1800 year 18 10% annually __________

2. P 4100 year 7 6% annually ___________

3. P 2000 6 months 12 8% semiannually ___________

4. P 1700 6 months 14 5% semiannually ___________

5. P 894 quarter 6 4% quarterly ____________

 Solve the following application problems.

1. Roman Rodriguez would like to know if he can retire in 35 years at age 60, when he
plan to fish a lot. Assume the total deposit into his retirement account at the community
college is P 3800 at the end of each year and that the fund earns 6% per year. Find (a)
the amount of the annuity and (b) the interest earned.

2. Monique Chaney places P 250 of her quarterly child support check into an annuity for
the education of her child. She does this at the end of each quarter for 8 years into an
account paying 8% per year, compounded quarterly. Find (a) the amount of the annuity
and (b) the interest earned.

3. In 4 years, Jennifer Videtto will need to purchase a delivery van for her plumbing
company. She estimates it will require a down payment of P 10,000 with payments of
P 950 per month for 48 months. (a) Find the total amount needed in 4 years assuming
12% compounded monthly. (b) Will she have enough if she invests P 2200 at the end
of every quarter for 4 years and earns 6% compounded quarterly?

4. Jessica Thames expects to receive P 18,400 per year based on her deceased husband’s
contributions to Social Security. Assume that she receives payments for 14 years and a
rate of 4% per year, and find the present value of this annuity.
 Section 2 Manipulating the Ordinary Annuity Formula

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Section 2 Exercises

1. A P 300,000 loan is due in one year. To repay the loan, the debtor deposits an
amount every month in a fund earning 8% m= 12. How much should he deposit
monthly?

2. A couple would like to accumulate P 500,000 in 5 years by making deposits at the

end of each quarter in an account that pays 16% compounded quarterly. What is
the size of each deposit?

3. A man borrows P 50,000. He agree to settle by paying every 6 months in 2 years.

If the interest is 8% compounded semi annually, how much should he pay every 6
months?

4. A man left his wife P1 million insurance policy. What monthly income would this
provide for 10 years if the insurance company pays 9% compounded monthly?

5. The cash price of a 32 inch LED TV is P25,000. A buyer who prefers installment
by paying P5000 as down payment and P1250 monthly installment for 18 months.
What is the nominal rate compounded monthly?
6. Find the rate of interest per period and the nominal rate compounded semi-
annually at which payments of P15000 at the end of each 6 months will amount to
P200,000 in 5 years?

7. A man borrows P60,000 at 24% compounded monthly. He will discharge the debt
by paying P 4500 monthly. Find the number of regular payments and the size of
the final payment.

8. A newlywed couple would like to accumulate P 500,000 by making P15,000

deposits at the end of each quarter in an account that pays 16% compounded
quarterly. How long will it take for them to save the said amount and determine
the size of the last deposit?
 Section 3 Annuity Due and Deferred Annuity

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Section 3 Exercises
Find the Future Value of an Annuity Due.

Annuity Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded of the Annuity
1 4000 every 6 months 12 years 10% semiannually
2 500 every month 2 1/2 years 18% monthly
3 44,000 every 6 months 8 years 6% semiannually
4 10,000 every 3 months 3 years 7% quarterly
5 20,000 every year 25 years 5% annually

Find the Present Value of an Annuity Due.

Annuity Payment Time Nominal Interest Present Value
Payment Frequency Period Rate Compounded of the Annuity
1 14,000 every year 10 years 10% annually
2 5,000 every month 2 1/4 years 18% monthly
3 40,000 every year 18 years 6% annually
4 13,000 every 3 months 4 years 7% quarterly
5 70,000 every 6 months 12 years 5% semiannually
Solve the Following Problems.
1. If Baruch Hardware Store invested P 1,000 at the beginning of each month at 12%
compounded monthly, how much be in the account after 5 years?

2. Find the future value of an annuity due of P7000 payable at the beginning of each
quarter for 6 years if the interest rate is 14% compounded quarterly.

3. Billy Bridget wants P5,000 at the end of quarter for the next 5 years. If Billy’s bank is
paying 8% interest compounded quarterly, how much must she deposit if she wants
the payments at the beginning of each 3-month period?

4. What is the cash price of a freezer that can be bought for P 7500 a quarter for two and
half years if the first payment is made now and the interest rate is 7% compounded
quarterly?

5. How much money must Bartley invest at the beginning of each quarter if he wishes to
receive P150,000 six years from now? Assume that the first payment starts now and
the interest rate is 7% compounded quarterly.
 6. A house that sells for P900,000 can be purchased under terms requiring 100 monthly
payments. Assume that the first payment begins now anthe d the interest rate is 12%
compounded monthly. What is the size of each monthly payment?

DEFERRED ANNUITY EXERCISES

1. Find the future value and the present value of an annuity of P 15,000 payable at the
end of every three months for 30 payments. The first payment is due at the end of
seven years. The interest rate is 11% compounded quarterly.

2. Blanche purchased a dining set for P 80,000 on May 13, 2020. She paid P 10,000 cash
and agreed to pay the balance plus interest at 9 ½% compounded annually in 14
annual payments, with the first payment due on May 13, 2023. What is the size of
each payment?

3. If the money is worth 5 ½ % compounded annually, what single payment now is

equivalent to 45 payments of P 35,000 each with the first payment due in five years?

4. If the money is worth 12% compounded semi-annually , find the present value of
P10,000 annuity every 6 months the first of which is due at the end of 4 years and the
last at the end of 8 years.
5. A retired employee accumulated an amount of P1.5 M on his retirement account.
Instead of taking as cash, it was invested in a portfolio earning 6% compounded
quarterly. If he plans to get his first pension after 2 years, how much would he receive
quarterly if he made an agreement that it would last for 10 years upon his first
quarterly pension.