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Module 9

Finding the TERM of


an Ordinary Annuity
Objectives:
• To derive formulas in finding for
the term of an ordinary annuity

• To solve for the term of an


annuity and compute the size of
the concluding payment
Formula:
(1 + 𝑖)𝑛 −1
𝐹=𝐴
𝑖
Formula:
(1 + 𝑖)𝑛 −1
𝐹=𝐴
𝑖

𝐹𝑖
= (1 + 𝑖)𝑛 −1
𝐴
Formula:
(1 + 𝑖)𝑛 −1
𝐹=𝐴
𝑖

𝐹𝑖
= (1 + 𝑖)𝑛 −1
𝐴
𝐹𝑖
+ 1 = (1 + 𝑖)𝑛
𝐴
Formula:
(1 + 𝑖)𝑛 −1
𝐹=𝐴
𝑖

𝐹𝑖
= (1 + 𝑖)𝑛 −1
𝐴
𝐹𝑖
+ 1 = (1 + 𝑖)𝑛
𝐴

𝐹𝑖
𝑙𝑜𝑔 + 1 = 𝑛 log(1 + 𝑖)
𝐴
Formula:
(1 + 𝑖)𝑛 −1
𝐹=𝐴
𝑖

𝐹𝑖
= (1 + 𝑖)𝑛 −1
𝐴
𝐹𝑖
+ 1 = (1 + 𝑖)𝑛
𝐴

𝐹𝑖
𝑙𝑜𝑔 + 1 = 𝑛 log(1 + 𝑖)
𝐴
𝑭𝒊
𝒍𝒐𝒈 +𝟏
𝒏= 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
𝑃𝑖
= 1 − (1 + 𝑖)−𝑛
𝐴
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
𝑃𝑖
= 1 − (1 + 𝑖)−𝑛
𝐴
−𝑛
𝑃𝑖
(1 + 𝑖) = 1 −
𝐴
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
𝑃𝑖
= 1 − (1 + 𝑖)−𝑛
𝐴
−𝑛
𝑃𝑖
(1 + 𝑖) = 1 −
𝐴
𝑃𝑖
−𝑛 log 1 + 𝑖 = 𝑙𝑜𝑔 1 −
𝐴
Formula:
(1 + 𝑖)𝑛 −1 1 − (1 + 𝑖)−𝑛
𝑃=𝐴 𝑛 =𝐴
𝑖(1 + 𝑖) 𝑖
𝑃𝑖
= 1 − (1 + 𝑖)−𝑛
𝐴
−𝑛
𝑃𝑖
(1 + 𝑖) = 1 −
𝐴
𝑃𝑖
−𝑛 log 1 + 𝑖 = 𝑙𝑜𝑔 1 −
𝐴
𝑷𝒊
𝒍𝒐𝒈 𝟏 −
𝒏=− 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑃 = 𝑃20,000
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑷𝒊
𝒍𝒐𝒈 𝟏 −
𝑃 = 𝑃20,000 𝒏=− 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑷𝒊
𝒍𝒐𝒈 𝟏 −
𝑃 = 𝑃20,000 𝒏=− 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
5.5%
𝑖= = 1.375% (𝑷𝟐𝟎, 𝟎𝟎𝟎)(𝟎. 𝟎𝟏𝟑𝟕𝟓)
4 𝒍𝒐𝒈 𝟏 −
𝑷𝟖𝟓𝟎
𝒏=−
𝐴 = 𝑃850 𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟏𝟑𝟕𝟓)
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑷𝒊
𝒍𝒐𝒈 𝟏 −
𝑃 = 𝑃20,000 𝒏=− 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
5.5%
𝑖= = 1.375% (𝑷𝟐𝟎, 𝟎𝟎𝟎)(𝟎. 𝟎𝟏𝟑𝟕𝟓)
4 𝒍𝒐𝒈 𝟏 −
𝑷𝟖𝟓𝟎
𝒏=−
𝐴 = 𝑃850 𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟏𝟑𝟕𝟓)

𝒏 = 𝟐𝟖. 𝟔𝟐
Doro borrows P20,000 with interest at 5.5%
compounded quarterly. He agrees to pay
P850 at the end of each quarter. How long
must he pay?
𝑷𝒊
𝒍𝒐𝒈 𝟏 −
𝑃 = 𝑃20,000 𝒏=− 𝑨
𝒍𝒐𝒈(𝟏 + 𝒊)
5.5%
𝑖= = 1.375% (𝑷𝟐𝟎, 𝟎𝟎𝟎)(𝟎. 𝟎𝟏𝟑𝟕𝟓)
4 𝒍𝒐𝒈 𝟏 −
𝑷𝟖𝟓𝟎
𝒏=−
𝐴 = 𝑃850 𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟏𝟑𝟕𝟓)

𝒏 = 𝟐𝟖. 𝟔𝟐
He needs to pay 28 quarterly payments of P850 plus
a concluding payment at the end of the 29th quarter.
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000

𝑃 = 𝑃20,000

5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=0

𝑃 = 𝑃20,000

5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=0

(1 + 𝑖)28 −1 −29
𝑃20,000 = 𝐴 + 𝐶𝑃(1 + 𝑖)
𝑖(1 + 𝑖)28

𝑃 = 𝑃20,000

5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=0

(1 + 𝑖)28 −1 −29
𝑃20,000 = 𝐴 + 𝐶𝑃(1 + 𝑖)
𝑖(1 + 𝑖)28

𝑃 = 𝑃20,000

5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=0

(1 + 𝑖)28 −1 −29
𝑃20,000 = 𝐴 + 𝐶𝑃(1 + 𝑖)
𝑖(1 + 𝑖)28

𝑃 = 𝑃20,000

5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=0

(1 + 𝑖)28 −1 −29
𝑃20,000 = 𝐴 + 𝐶𝑃(1 + 𝑖)
𝑖(1 + 𝑖)28

𝑃 = 𝑃20,000
𝑪𝑷 = 𝑷𝟓𝟐𝟗. 𝟕𝟓
5.5%
𝑖= = 1.375%
4

𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

1+𝑖 28 −1
𝑃20,000(1 + 𝑖)29 = 𝐴 1 + 𝑖 + 𝐶𝑃
𝑖

𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

1+𝑖 28 −1
𝑃20,000(1 + 𝑖)29 = 𝐴 1 + 𝑖 + 𝐶𝑃
𝑖

𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

1+𝑖 28 −1
𝑃20,000(1 + 𝑖)29 = 𝐴 1 + 𝑖 + 𝐶𝑃
𝑖

𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

1+𝑖 28 −1
𝑃20,000(1 + 𝑖)29 = 𝐴 1 + 𝑖 + 𝐶𝑃
𝑖

𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
A A A A A A A CP

0 1 2 3 4 26 27 28 29

P20,000
Reference @ n=29

1+𝑖 28 −1
𝑃20,000(1 + 𝑖)29 = 𝐴 1 + 𝑖 + 𝐶𝑃
𝑖

𝑪𝑷 = 𝑷𝟓𝟐𝟗. 𝟕𝟓
𝑃 = 𝑃20,000
5.5%
𝑖= = 1.375%
4
𝐴 = 𝑃850
Ms. Marie Abellar invests her retirement
benefits of 3.8 million at 9%
compounded monthly. If she withdraws
the money in monthly payments of
P50,000, how many regular payments
will she get?
𝟏𝟏𝟐 𝒎𝒐𝒏𝒕𝒉𝒍𝒚 𝒘𝒊𝒕𝒉𝒅𝒓𝒂𝒘𝒂𝒍𝒔 𝒐𝒇 𝑷𝟓𝟎, 𝟎𝟎𝟎
𝑪𝑾 = 𝑷𝟒𝟕, 𝟓𝟒𝟖. 𝟖𝟒
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.

𝐴 = 𝑃480
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.

𝐴 = 𝑃480
7%
𝑖= = 3.5%
2
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.

𝐴 = 𝑃480
7%
𝑖= = 3.5%
2

𝐹 = 𝑃18,500
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.
𝑭𝒊
𝒍𝒐𝒈 +𝟏
𝒏= 𝑨
𝐴 = 𝑃480 𝒍𝒐𝒈(𝟏 + 𝒊)
7%
𝑖= = 3.5%
2

𝐹 = 𝑃18,500
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.
𝑭𝒊
𝒍𝒐𝒈 +𝟏
𝒏= 𝑨
𝐴 = 𝑃480 𝒍𝒐𝒈(𝟏 + 𝒊)
7%
𝑖= = 3.5% (𝟏𝟖, 𝟓𝟎𝟎)(𝟎. 𝟎𝟑𝟓)
2 𝒍𝒐𝒈 +𝟏
𝟒𝟖𝟎
𝐹 = 𝑃18,500 𝒏=
𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟑𝟓)
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.
𝑭𝒊
𝒍𝒐𝒈 +𝟏
𝒏= 𝑨
𝐴 = 𝑃480 𝒍𝒐𝒈(𝟏 + 𝒊)
7%
𝑖= = 3.5% (𝟏𝟖, 𝟓𝟎𝟎)(𝟎. 𝟎𝟑𝟓)
2 𝒍𝒐𝒈 +𝟏
𝟒𝟖𝟎
𝐹 = 𝑃18,500 𝒏=
𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟑𝟓)
𝒏 = 𝟐𝟒. 𝟖𝟐
Find the number of semi-annual deposits of P480 each and
the concluding deposit, which must be made to accumulate
P18,500, if money earns interest at 7% compounded semi-
annually.
𝑭𝒊
𝒍𝒐𝒈 +𝟏
𝒏= 𝑨
𝐴 = 𝑃480 𝒍𝒐𝒈(𝟏 + 𝒊)
7%
𝑖= = 3.5% (𝟏𝟖, 𝟓𝟎𝟎)(𝟎. 𝟎𝟑𝟓)
2 𝒍𝒐𝒈 +𝟏
𝟒𝟖𝟎
𝐹 = 𝑃18,500 𝒏=
𝒍𝒐𝒈(𝟏 + 𝟎. 𝟎𝟑𝟓)
𝒏 = 𝟐𝟒. 𝟖𝟐

24 semi-annual deposits of P480 plus a concluding


deposit at n = 25
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25


A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25

1+𝑖 24 −1
𝑃18,500 = 𝐴 1 + 𝑖 + 𝐶𝐷
𝑖
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25

1+𝑖 24 −1
𝑃18,500 = 𝐴 1 + 𝑖 + 𝐶𝐷
𝑖
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25

1+𝑖 24 −1
𝑃18,500 = 𝐴 1 + 𝑖 + 𝐶𝐷
𝑖
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25

1+𝑖 24 −1
𝑃18,500 = 𝐴 1 + 𝑖 + 𝐶𝐷
𝑖
A A A A A A A CD

0 1 2 3 4 22 23 24 25

𝐴 = 𝑃480
7%
𝑖= = 3.5% P18,500
2

𝐹 = 𝑃18,500 Reference @ n=25

1+𝑖 24 −1
𝑃18,500 = 𝐴 1 + 𝑖 + 𝐶𝐷
𝑖

𝑪𝑫 = 𝑷𝟐𝟖𝟒. 𝟎𝟕
Assignment:
A man deposits P 5,200 at the end of
each three months in an account paying
14% converted quarterly. In order to
accumulate P105,000, how many
regular deposits every quarter must he
make, and what is the size of the
concluding deposit, if one is needed?

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