General Ordinary Annuity

 the periodic payment is made at the end of the

payment interval
 formula is the same as that for simple ordinary
annuity; the given interest rate per period must be
converted to an equivalent rate per payment
interval

Examples:
1. Kyla started to deposit ₱1 300.00 monthly in a fund that
pays 7% compounded quarterly. How much will be in
the fund after 13 years?

 Notice that the monthly payment has no applied

rate unlike with the entire fund paying 7%
compounded quarterly
 FIRST STEP: Get the equivalent rate.

𝐹1 = 𝐹2
𝑟 𝑛𝑡 𝑟 𝑛𝑡
𝑃 (1 + ) = 𝑃 (1 + )
𝑛 𝑛
1
𝑟 12𝑡 𝑟 4𝑡 4𝑡
[𝑃 (1 + ) = 𝑃 (1 + ) ]
12 4
3 𝑟 3 3 0.07
√(1 + ) = √(1 + )
12 4
1
𝑟 0.07 3
= (1 + ) −1
12 4
𝑟
= 0.0057996
12

One (1) sheet of yellow pad for each set of problems. Read and analyze. Solve
completely. Write legibly. Box the final answer. ENJOY!

Due: October 17, 2016

  SECOND STEP: Solve for the future value.

𝑟 𝑛𝑡
(1 + 𝑛) − 1
𝐹=𝑅 𝑟
𝑛
(1 + 0.0057996)156 − 1
𝐹 = 1300
0.0057996
𝑭 = ₱𝟑𝟐𝟖 𝟑𝟒𝟕. 𝟑𝟑

2. Liza saves ₱10 000.00 every 6 months in a bank that

pays 0.40% compounded monthly. How much will be
her savings after 10 years?
Answer: 𝑭 = ₱𝟐𝟎𝟑 𝟖𝟒𝟗. 𝟑𝟎

3. Ken borrowed an amount of money from Kim. He

agrees to pay the principal plus interest by paying
₱29 892.00 every 6 months for 36 months. How much
money did he borrow if interest is 8% compounded
quarterly?

Answer: 𝑷 = ₱𝟖𝟐 𝟖𝟗𝟎. 𝟎𝟗

One (1) sheet of yellow pad for each set of problems. Read and analyze. Solve
completely. Write legibly. Box the final answer. ENJOY!

Due: October 17, 2016

Deferred Annuity
 an annuity whose term does not begin until the
expiration of a specified time
𝟏−(𝟏+𝒋)−𝒏
 𝑷 = 𝑹[ ] (𝟏 + 𝒋)−𝒃
𝒋
o 𝑹 - regular or periodic payment
o 𝒋 - interest rate divided the
frequency of conversion
o 𝒏 - total conversion period
o 𝒃 - deferred period

Examples:
1. On his 40th birthday, Mr. Ramos decided to buy a
pension plan for himself. This plan will allow him to claim
₱10 000.00 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?
Given:
𝑅 = 10 000
0.08
𝑗= 4
𝑛 = 20 (5 𝑦𝑒𝑎𝑟𝑠 ∗ 4[𝑒𝑣𝑒𝑟𝑦 3 𝑚𝑜𝑛𝑡ℎ𝑠])
𝑏 = 80 (20 [𝑓𝑟𝑜𝑚 40𝑡ℎ 𝑡𝑜 60𝑡ℎ] ∗ 4[𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦])

1 − (1 + 𝑗)−𝑛
𝑃 = 𝑅[ ] (1 + 𝑗)−𝑏
𝑗
0.08 −20
1 − (1 +
4 ) 0.08 −80
𝑃 = 𝑅[ ] (1 + )
0.08 4
4
𝑷 = ₱𝟑𝟑 𝟓𝟑𝟖. 𝟑𝟖
One (1) sheet of yellow pad for each set of problems. Read and analyze. Solve
completely. Write legibly. Box the final answer. ENJOY!

Due: October 17, 2016

2. Emma availed a cash loan that gave her an option to
pay ₱10 000 monthly for 1 year. The first payment is due
after 6 months. How much is the present value of the
loan if the interest rate is 12% converted monthly?

Answer: 𝑷 = ₱𝟏𝟎𝟕 𝟎𝟖𝟖. 𝟐𝟎

3. Adrian purchased a laptop through the credit

cooperative of their company. The cooperative
provides an option for a deferred payment. Adrian
decided to pay after 4 months of purchase. His monthly
payment is computed as ₱3 500 payable in 12 months.
How much is the cash value of the laptop if the interest
rate is 8% convertible monthly?

Answer: 𝑷 = 𝟑𝟗 𝟒𝟒𝟏. 𝟏𝟒

One (1) sheet of yellow pad for each set of problems. Read and analyze. Solve
completely. Write legibly. Box the final answer. ENJOY!

Due: October 17, 2016

Business Consumer Loans

𝟏 − (𝟏 + 𝒋)−(𝒏−𝒌)
𝑩 = 𝑹[ ]
𝒋
where
o 𝑹 - regular or periodic payment
o 𝒋 - interest rate divided the
frequency of conversion
o 𝒏 - total number of conversion
o 𝒌 - number of payments paid

Example:
1. Ms. Tan borrowed some money from a bank that offers
an interest rate of 12% compounded monthly. Her
monthly amortization for 5 years is₱11 122.22. How much
is the outstanding balance after the 12th payment?

Given:
𝑅 = 11 122.22
0.12
𝑗 = 12
𝑘 = 12
𝑛 = 60 (12 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 𝑓𝑜𝑟 5 𝑦𝑒𝑎𝑟𝑠)

0.12 −48
1−(1+ )
12
𝐵 = 11122.22 [ 0.12 ]
12

𝑩 = ₱𝟒𝟐𝟐 𝟑𝟓𝟒. 𝟕𝟑

One (1) sheet of yellow pad for each set of problems. Read and analyze. Solve
completely. Write legibly. Box the final answer. ENJOY!

Due: October 17, 2016