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General Annuity
An annuity wherein the interest
conversion period is unequal or not
the same as the payment interval.
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(1 + 𝑖)𝑛 −1
𝐹𝑉 = 𝑃
(1 + 𝑖)𝑏 −1
4
Where
P = regular payment
𝑟
i = rate per conversion period ( i = where r is the annual
𝐾
rate and K is the no. of conversion periods in a year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝑝
b = where p is the no. of months in a payment interval
,
𝑐
and c is the number of months in a compounding period.
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Example:
1. P2500.00 will be invested in an account at the end of each
year at 4% compounded semi-annually. Find the size of the
fund at the beginning of the 16th year.
Given:
P = 25000
t= 15 years
K=2
n= 15(2) =30
i = 𝑟/𝐾 = 4%/2 = 0.02
c=6
p = 12
b = p/c =12/6 or 2
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Given:
P = 2000
t= 5 years
K=2
n= 5(2) =10
i = 𝑟/𝐾 = 4%/2 = 0.02
c=6
p = 12
b = p/c =12/6 or 2
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Where
P = regular payment
𝐫
i = rate per conversion period ( i = where r is the annual
𝐊
rate and K is the no. of conversion periods in a year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝐩
b= , where p is the no. of months in a payment interval
𝐜
and c is the number of months in a compounding period.
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Example:
1. Find the present value of an ordinary of P2000 payable
annually for 9 years if the money is worth 5%
compounded quarterly.
Given :
P = 2000
t= 9 years
K=4
n= 9(4) =36
i = 𝑟/𝐾 = 5%/4 or 0.0125
c=3
p = 12
b = p/c =12/3 or 4
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2. Find the amount of an annuity of P50,000.00 payable
semi-annually for 5 years if money is worth 6% compounded
quarterly.
Given :
P = 50,000
t= 10 years
K=4
n= 5(4) =20
i = 𝑟/𝐾 = 6%/4 or 0.015
c=3
p = 12
b = p/c =12/3 or 4
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3. What is the present value of a general ordinary annuity of
P4,200.00 per quarter for 10 years if money is worth 9%
compounded semi-annually?
Given :
P = 4,200
t= 10 years
K=2
n= 10(2) =20
i = 𝑟/𝐾 = 9%/2 or 0.045
c=6
p = 12
b = p/c =12/6 or 2
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(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +𝒊
𝒊 (𝟏+𝒊)𝒃 −𝟏
𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏
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Where:
PV= Present Value
FV= Future Value
P= Annuity payment
𝑟
i= rate per compounding period ( i =where r is the
𝐾
annual rate and K is the no. of conversion periods in a
year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝐩
b = , where p is the no. of months in a payment interval and
𝐜
c is the number of months in a compounding period.
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Solution:
(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 + 0.02
𝒊 (𝟏+𝒊)𝒃 −𝟏
(𝟏+𝟎.𝟎𝟐)𝟒 −𝟏 𝟎.𝟎𝟐
𝑭𝑽 = 𝟑𝟓𝟎𝟎 + 0.02
𝟎.𝟎𝟐 (𝟏+𝟎.𝟎𝟐)𝟏/𝟔 −𝟏
= 3500(4.12)(6.07)
=87529.4
Because P87 529.40 is less than P100 000, Emy will not
have enough money at the end of 2 years.
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Amy 𝒓 𝟔%
i= = or 0.015
𝑲 𝟒
Given
c= 3
P= 2000
p= 1
n= t • K= (5)(4)= 20
𝒑 𝟏
b= =
𝒄 𝟑
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Solution:
(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +i
𝒊 (𝟏+𝒊)𝒃 −𝟏
(𝟏+𝟎.𝟎𝟏𝟓)𝟐𝟎 −𝟏 𝟎.𝟎𝟏𝟓
𝑭𝑽 = 𝟐𝟎𝟎𝟎 + 0.015
𝟎.𝟎𝟏𝟓 (𝟏+𝟎.𝟎𝟏𝟓)𝟏/𝟑 −𝟏
= 2000(23.12) (3.03)
=P 140 107.20
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Susan 𝒓 𝟔%
i= = or 0.005
𝑲 𝟏𝟐
Given:
c= 1
P= 6000
p= 3
n= t • K= (5)(12)= 60
𝒑 𝟑
b= = or 3
𝒄 𝟏
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Solution:
(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +i
𝒊 (𝟏+𝒊)𝒃 −𝟏
(𝟏+𝟎.𝟎𝟎𝟓)𝟔𝟎 −𝟏 𝟎.𝟎𝟎𝟓
𝑭𝑽 = 𝟔𝟎𝟎𝟎 + 0.005
𝟎.𝟎𝟎𝟓 (𝟏+𝟎.𝟎𝟎𝟓)𝟑 −𝟏
= 6000(69.77) (0.34)
=P 142 330.80
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Given:
𝒓 𝟔%
P= 10 000 i= = or 0.03
𝑲 𝟐
t= 10 years c= 6 , p= 3
𝒑 𝟑
K= 2 b= = or 0.5
𝒄 𝟔
n= t • K=(10)(2)= 20
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Solution:
𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏
𝟏 − (𝟏 + 𝟎. 𝟎𝟑)−𝟐𝟎 𝟎. 𝟎𝟑
𝑷𝑽 = 𝟏𝟎 𝟎𝟎𝟎 𝟎.𝟓
+ 𝟎. 𝟎𝟑
𝟎. 𝟎𝟑 (𝟏 + 𝟎. 𝟎𝟑) −𝟏
= 10 000 (14.88)(2.04)
= 303 552
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Given:
𝒓 𝟒%
P= 500 i= = or 0.04
𝑲 𝟏
t= 8 years c= 12
K= 1 p=1
𝒑 𝟏
n= t • K=(8)(1)= 8 b= = or 0.08
𝒄 𝟏𝟐
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Solution:
𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏
𝟏 − (𝟏 + 𝟎. 𝟎𝟒)−𝟖 𝟎. 𝟎𝟒
𝑷𝑽 = 𝟓𝟎𝟎 𝟏/𝟏𝟐
+ 𝟎. 𝟎𝟒
𝟎. 𝟎𝟒 (𝟏 + 𝟎. 𝟎𝟒) −𝟏
= 500 (6.73)(12.26)
= 41 254.90
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3. An item was acquired, which is paid for 9 years
with P3500 payments of the beginning of each
month by applying an interest rate of 21%
compounded quarterly. What is the cash value?
Given:
P= 3 500 i= 𝒓/𝑲= 21%/4 or
0.0525
t= 9 years c= 3
K= 4 p=1
n= t • K=(9)(4)= 36 b= 𝒑/𝒄= 3/𝟏 or 3
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Solution:
𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏
𝟏 − (𝟏 + 𝟎. 𝟎𝟓𝟐𝟓)−𝟑𝟔 𝟎. 𝟎𝟓𝟐𝟓
= 𝟑 𝟓𝟎𝟎 𝟑 + 𝟎. 𝟎𝟓𝟐𝟓
𝟎. 𝟎𝟓𝟐𝟓 (𝟏 + 𝟎. 𝟎𝟓𝟐𝟓) −𝟏
= 3 500(16.03)(3.10)
= P 173 925.50
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