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General Annuity PDF
General Annuity PDF
General Annuity PDF
ANNUITY
Learning Objective
• Solve problems involving general annuity
Types of Annuity Certain
Simple Annuity
The interest conversion period (𝑚) is equal to the
payment interval (𝑝𝑖)
𝑚 = 𝑝𝑖
General Annuity
The interest conversion period (𝑚) is not equal to the
payment interval (𝑝𝑖)
𝑚 ≠ 𝑝𝑖
Equivalent Rates
Case 1
𝑚
𝐺 𝑚𝑒
𝑒𝑞 = 𝑚𝑒 1+ − 1 x 100
𝑚
Amount or Sum of General Annuity
𝑛
(1 + 𝑗) −1
𝑆𝑔 = 𝑅
𝑗
where:
𝑆𝑔 = amount or sum of general annuity
𝑅 = periodic payment
𝑗 = equivalent interest rate per payment interval
𝑛 = conversion period of the whole term, 𝑛 = 𝑡𝑚
Present Value of General Annuity
−𝑛
1 − (1 + 𝑗)
𝐴𝑔 = 𝑅
𝑗
where:
𝐴𝑔 = present value of general annuity
𝑅 = periodic payment
𝑗 = equivalent interest rate per payment interval
𝑛 = conversion period of the whole term, 𝑛 = 𝑡𝑚
General Annuity
Example 1