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    DEFERRED ANNUITY Final

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    RYAN C. ENRIQUEZ
    The document discusses deferred annuities, including defining key terms like deferred annuity and period of deferral. It provides examples of how to calculate the present value and period of deferral for deferred annuity cash flows. The examples show setting up the present value formula and calculating the number of actual vs artificial payments. Seatwork problems at the end ask the reader to calculate present values of deferred loans and deposits given interest rates and payment schedules.

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    DEFERRED ANNUITY Final

    Uploaded by

    RYAN C. ENRIQUEZ
    117 views27 pages
    The document discusses deferred annuities, including defining key terms like deferred annuity and period of deferral. It provides examples of how to calculate the present value and period of deferral for deferred annuity cash flows. The examples show setting up the present value formula and calculating the number of actual vs artificial payments. Seatwork problems at the end ask the reader to calculate present values of deferred loans and deposits given interest rates and payment schedules.

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    MATH 11 ANNUITY

    Original Title

    DEFERRED ANNUITY final

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    The document discusses deferred annuities, including defining key terms like deferred annuity and period of deferral. It provides examples of how to calculate the present value and period of deferral for deferred annuity cash flows. The examples show setting up the present value formula and calculating the number of actual vs artificial payments. Seatwork problems at the end ask the reader to calculate present values of deferred loans and deposits given interest rates and payment schedules.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    117 views27 pages

    DEFERRED ANNUITY Final

    Uploaded by

    RYAN C. ENRIQUEZ
    The document discusses deferred annuities, including defining key terms like deferred annuity and period of deferral. It provides examples of how to calculate the present value and period of deferral for deferred annuity cash flows. The examples show setting up the present value formula and calculating the number of actual vs artificial payments. Seatwork problems at the end ask the reader to calculate present values of deferred loans and deposits given interest rates and payment schedules.

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    Deferred Annuity

    Learning Outcome(s):
    At the end of the lesson, the learner is
    able to calculate the present value and
    period of deferral of a deferred annuity
    Lesson Outline:

    1. Deferred Annuity
    2. Present Value of a Deferred
    Annuity
    3. Period of Deferral of a Deferred
    Annuity
    Definition of Terms

    Deferred Annuity – an annuity


    that does not begin until a given
    time interval has passed
    Definition of Terms

    Period of Deferral – time between the purchase


    of an annuity and the start of the payments for
    the deffered annuity.

    Example: Annual payments of P2,500 for 24


    years that will start 12 years from now.
    CASH FLOW

    Period of Deferral
    6 periods or 6 months
    4 periods or 4 years
    7 periods or 7 quarters
    9 periods or 9 semi-annual intervals
    2 periods or 2-year intervals
    Present Value of
    Deferred Annuity
    FORMULA:

    𝑟
    𝑗=
    𝑚
    n
    𝑘=𝑚 𝑡
    EXAMPLE 1:

    On his 40th birthday, Mr. Ramos decided to


    buy a pension plan for himself. This plan will
    allow him to claim P10,000 quarterly for 5 years
    starting 3 months after his 60th birthday. What
    one-time payment should he make on his 40 th

    birthday to pay off this pension plan, if the


    interest rate is 8% compounded quarterly?
    Solution:

    On his 40th birthday, Mr. Ramos decided to buy a


    pension plan for himself. This plan will allow him to claim
    P10,000 quarterly for 5 years starting 3 months after his
    60th birthday. What one-time payment should he make on
    his 40 birthday to pay off this pension plan, if the interest
    th

    rate is 8% compounded quarterly?


    4
    Given: R = 10,000 m=4 t=5 𝑖 = 0.08
    Find: P
    Solution:
    On his 40th birthday, Mr. Ramos decided to buy a pension plan for himself. This plan
    will allow him to claim P10,000 quarterly for 5 years starting 3 months after his 60th
    birthday. What one-time payment should he make on his 40th birthday to pay off this
    pension plan, if the interest rate is 8% compounded quarterly?
    4
    Given: R = 10,000 m=4 t=5 𝑖 = 0.08
    Find: P
    k = mt = (4 )(20) = 80
    Number of artificial payments/period of deferral:
    Number of actual payments: n = mt = (4)(5) = 20
    Solution:

    Number of artificial payments/period of deferral:


    k = mt = (4 )(20) = 80
    Number of actual payments: n = mt = (4)(5) = 20
    SOLUTION:

    Therefore, the present value


    of these monthly pensions is
    P33,538.38.
    EXAMPLE 2:

    A credit card company offers a deferred


    payment option for the purchase of any
    appliance. Rose plans to buy a smart television
    set with monthly payments of P4,000 for 2 years.
    The payments will start at the end of 3 months.
    How much is the cash price of the TV set if the
    interest rate is 10% compounded monthly?
    Solution:

    A credit card company offers a deferred payment option


    for the purchase of any appliance. Rose plans to buy a smart
    television set with monthly payments of P4,000 for 2 years.
    The payments will start at the end of 3 months. How much
    is the cash price of the TV set if the interest rate is 10%
    compounded monthly?
    %
    Solution:
    A credit card company offers a deferred payment option for the purchase of any
    appliance. Rose plans to buy a smart television set with monthly payments of P4,000 for 2
    years. The payments will start at the end of 3 months. How much is the cash price of the
    TV set if the interest rate is 10% compounded monthly?

    Number of artificial payments: k = 2


    Number of actual payments: n = mt = (12)(2) = 24
    Solution:

    Number of artificial payments: k = 2


    Number of actual payments: n = mt = (12)(2) = 24
    SOLUTION:

    Therefore, the present value


    of these monthly pensions is
    P85,260.53.
    SEATWORK:

    1. Melwin availed of a loan from a bank that


    gave him an option to pay P20,000
    monthly for 2 years. The first payment is
    due after 4 months. How much is the
    present value of the loan if the interest
    rate is 10% converted monthly?
    SEATWORK:

    2. Mr. Quijano decided to sell their farm and to


    deposit the fund in a bank. After computing
    the interest, they learned that they may
    withdraw P480,000 yearly for 8 years starting
    at the end of 6 years when it is time for him
    to retire. How much is the fund deposited if
    the interest rate is 5% converted annually?
    ANSWER NO 1.
    ANSWER NO 2.

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