Simple Annuities

GOOD
MORNIN
Simple
Annuitie
Objective
s:
1. define simple annuities;
2. illustrate simple
annuities ;
3. represent annuities in
Annuity - a
sequence of
payments made
at equal (fixed)
intervals or
periods of time.
Examples:
1.Rental payment
2. Monthly pensions
3. Monthly payment
for car loan
4. Educational plan
ANNUITIES
Simple Annuity General Annuity
- an - an
According to annuity where annuity where
payment the the
interval and payment payment
interest intervals is the intervals is not
period same as the the same as the
interest interest
period period
Ordinary Contingent
Annuity (or Annuity -
Annuity an annuity in
Accordin Immediate) - which the
g to a payments
payment type of extend over
annuity in an indefinite
which (or
the indeterminate
payments ) length of
are made time
Contingent
Annuity -
Annuity an annuity
Certain - in which
an annuity the
Accordin in which payments
g to payments extend over
duration begin and an
end indefinite
Determine if the given situation is
general annuity or simple annuity
a. Payments are made at the end of
each month for a loan that charges
1.05% interest compoundedGENERAL
quarterly ANNUITIES
b. A deposited of P5,500 was made
at the end of every three months to
an account that earns SIMPLE
5.6% interest
Determine whether the
situation describe an ordinary
annuity or an annuity
a. Jun’s monthly mortgage
due
payment is P35,148.05 at
ORDINARY the
end of each month ANNUITIES
b. The rent of apartment is P
7,000.00 and due at the
ANNUITY DUE
beginning of each month.
DEFINITIONS OF
TERMS
ANNUITIES
Terms of annuity (t)
- time between the
first payment interval
and last payment
Regular or
Periodic payment
(R) - the amount of
each payment
Amount(Future Value)
of an annuity (F) -
sum of future values of
all payment to be made
during the entire term of
Present Value of an
annuity ( P) - sum of
present value of all
the payment to be
made during the
FORMULA in
Solving Simple
Annuity
𝑛=𝑚𝑡
Example 1.
Mrs. Chua would like to
save ₱3,000 every month
in a fund that gives 9%
compounded monthly. How
much is the amount or the
future value of her savings
Example 1
Mrs. Chua would like to save ₱3,000 every
month in a fund that gives 9% compounded
monthly. How much is the amount or the
future value of her savings after 6 months.
Given:
R = P3,000
t = 6 months
n = mt = 12(1/2)
=6
i= =
Example 2:
In order to save for her high
school graduation, Marie
decided to save ₱200 at the
end of each month. If the
bank pays 0.25%
compounded monthly, How
Example 2:
In order to save for her high school graduation
Marie decided to save ₱200 at the end of each
month. If the bank pays 0.25% compounded
monthly, how much will her money be at the
Given: end of 6 years?
R = P200
t = 6 years
n = mt = 12(6) =
72
i= =
TRY THIS
₱50,000 deposited every

year for 5 years at 8% per
year compounded
annually.
TRY THIS
Monthly payment of ₱3,

000 for 4 years with
interest rate of 3%
compounded monthly.
Present
Value
Example 3:
Find the present value (P) of the
monthly payments of ₱
2,000 for 5 years with interest
rate of 12% compounded
monthly.
Example 3:
Find the present value (P) monthly
payments of ₱ 2,000 for 5 years with
interest rate of 12% compounded
Given: monthly.
R = ₱ 2,000
t = 5 years
n = mt = 12(5) =
60
i= =
TRY THIS
Mr. Rabiya made a
downpayment for a car. The
remaining amount is to be
settled by paying ₱16,200 at
the end of each month, if
interest
𝑃 is
= 10.5%compounded
₱ 753 , 702.20
Periodic
Payment
𝑃
𝑅= −𝑛
1 − ( 1+𝑖 )
𝑖
Example 4:
Paolo borrowed ₱ 100,000. He
agrees to pay the principal plus
interest by paying an equal
amount of money each year for
3 years. What should be his
annual payment if interest is 8%
compounded annually?
Example 3:
Paolo borrowed ₱ 100,000. he agrees to pay the
principal plus interest by paying an equal amount of
money each year for 3 years. What should be his
annual payment if interest is 8% compounded
annually?
Given:
P = ₱ 100,000
t = 3years
n = mt = 1(3) = 3
i= =
R = ₱ 38,803.35
Example 5:
Mr. Ribaya would like to save
₱500, 000 for his son’s
college education. How much
should he deposit in a savings
account every 6 months for
12 years if interest is 1%
compounded semi-annually?
Example 3:
Mr. Ribaya would like to save ₱500, 000 for his son’s
college education. How much should he deposit in a
savings account every 6 months for 12 years if interest
is 1% compounded semi-annually?
Given:
F = ₱ 500,000
t = 12 years
n = mt = 2(12) =
24
i= = R = ₱ 19,660.31
TRY THIS
Mr. Edgar borrowed from his
friend ₱200,000.00 He
promised to pay the amount
plus its interest by an equal
amount of each year for 3
years. What must be his
ACTIVITY
1. How much should you invest in a fund of
each year paying 2% compounded annually
to accumulate ₱100,000.00 in 5 years?
2. Find the Present Value (P) and the Future
Value (F) of quarterly payments of ₱ 2,000.00
for 5 years with interest rate of 8%
compounded quarterly.
3. The value of a car requires a ₱ 169,000.00
cash downpayment and a monthly payment
of ₱12,000.00. If money is computed at 10%
compounded monthly. How much is the cash

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GOOD

₱50,000 deposited every

Monthly payment of ₱3,

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