GM Simple and General Annuity

BASIC BUSINESS MATHEMATICS
GENERAL MATHEMATICS
a fixed sum of money paid
to someone at regular
intervals, subject to a fixed
compound interest rate
payable for a definite
duration. Begins and ends
on a definite or fixed date
(monthly payment of car
loan)
annuity payable for an
indefinite duration
(insurance); dependent on
some certain event
interest compounding
period is equal or the same
as the payment interval
period is unequal or not the
same as the payment
interval
annuity in which the
regular payment is made
at the end of each payment
interval
annuity in which the
regular payment is made
at the beginning of each
payment interval
the regular payment is not
made at the beginning nor
at the end of each payment
interval, but some later
date
a series of regular payments
which are to run infinitely or
forever (Fixed coupon
payments on permanently
invested (irredeemable)
sums of money are prime
examples of perpetuities.)
the time between
successive payments
t - time between the first
payment interval and last
payment interval
R - the amount of each
payment
F - sum of future values of
all the payments to be
made during the entire
term of the annuity
P - sum of present values
of all the payments to be
made during the entire
term of the annuity
Amount and Present
Value of an
Ordinary Annuity
1. Suppose Mrs. Remoto would like
to save Php 3,000 at the end of each
month, for six months, in a fund that
gives 9% compounded monthly. How
much is the amount or future value
of her savings after 6 months?
2. In order to save for her high school
graduation, Marie decided to save
Php 200 at the end of each month. If
the bank pays 0.250% compounded
monthly, how much will her money
be at the end of 6 years?
3. Rose works very hard because she wants to
have enough money in her retirement account
when she reaches the age 60. She wants to
withdraw Php 36,000 every 3 months for 20 years
starting 3 months after she retires. How much
must Rose deposit at retirement at 12% per
year compounded quarterly for the
annuity.
The cash value or cash price is equal
to the down payment (if there is
any) plus the present value of the
installment payments.
4. Mr. Ribaya paid Php 200,000 as down
payment for a car. The remaining amount is
to be settled by paying Php 16,200 at the
end of each month for 5 years. If interest is
10.5% compounded monthly, what is the
cash price of his car?
5. Paolo borrowed Php 100 000.
He agrees to pay the principal plus
interest by paying an equal
amount of money each year for 3
years. What would be his annual
payment if interest is 8%
compounded annually?
6. Mr. Ribaya would like to save
Php 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.
1. Mr. Goson's monthly insurance premium is Php
500, payable at the end of each month. His policy
matures 20 years later, after which, he can
withdraw all his payments plus the interest earned.
If money is worth 15% compounded monthly, how
much does he expect to withdraw on the maturity of
his policy?
2. How much must be deposited
now in a bank paying 9%
compounded month if it is
desired that a monthly
withdrawal of Php 3 000 can be
made for 5 years?
3. For a low cost house and lot, Mrs. Bolaños paid
Php 300 000 in cash and agreed to pay Php 5 430 at
the end of each month for a period of 10 years.If
money is worth 6% compounded monthly,
a. What is the equivalent cash price of the house
and lot?
b. b. What is the price by installment after 10 years?
period is unequal or not the
same as the payment
interval
Amount and Present Value of an Ordinary Annuity
7. Cris started to deposit
Php 1,000 monthly in a fund that
pays 6% compounded quarterly.
How much will be in the fund
after 15 years?
8. A teacher saves Php 5,000
every 6 months in a bank that
pays 0.25% compounded
monthly. How much will be her
savings after 10 years.
9. ABC Bank pays interest at the
rate of 2% compounded
quarterly. How much will have
in the bank at the end of 5 years
if he deposits Php 3,000
every month?
10. Ken borrowed an amount of money
from Kat. He agrees to pay the principal
plus interest by paying Php 38,973.76
each year for 3 years. How much money
did he borrow if interest is 8%
compounded quarterly?
11. Mrs. Remoto would like to buy a
television (TV) set payable for 6 months
starting at the end of the month. How
much is the cost of the TV set if her
monthly payment is Php 3,000 and
interest is 9% compounded
semi-annually?
12. Find the monthly payment of
the future value of Php 50,000
for 1 year with an interest rate
of 10% compounded
quarterly.
13. To accumulate a fund of
Php 500,000 in 3 years, how much should
Aling Paring deposit in her account every
3 months if it pays an interest of 5.5%
compounded annually?
14. Nadine is the beneficiary of
Php 1,000,000 insurance policy. Instead of
taking the money as lump sum, she opted to
receive a monthly stipend over a period of
10 years. If the insurance policy pays an
interest of 5% compounded annually, what
will her monthly stipend?

GM Simple and General Annuity

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BASIC BUSINESS MATHEMATICS

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