DE LA SALLE-COLLEGE OF SAINT BENILDE

SCHOOL OF MULTIDISCIPLINARY STUDIES

ACT. 3 – __________, 2020

ANNUITY (FINDING A, S , n AND x)
OLGE01
NAME: SCORE

Ordinary Annuity (Finding A and S)

1  1  i  n   1  i n  1 1  1  i  n 
A  R  S  R  CP  DP  R  
 i   i   i 
Formula:
1. To have his own pad, James decided to deposit Php20,000 at the end of each month in a bank paying 7%
compounded monthly. How much would he expect to have in three years?

Given: R = Php 20 000 m = 12 i = 0.07/12 = 0.0058333333333 t = 3 n = 36

Formula : S = R [ (1 + i)n - 1 / i ]

Solution:

S = 20 000 [ (1 + 0.0058333333333)³⁶ - 1 / 0.0058333333333 ]

S = 20 000 [ (1.0058333333333)³⁶ - 1 / 0.0058333333333 ]

S = 20 000 [ 1.23292558747546 - 1 / 0.0058333333333 ]

S = 20 000 ( 0.23292558747546 / 0.0058333333333 )

S = 20 000 ( 39.930100710307 )

S = Php 798 602.01

2. A brand new pick-up truck was bought for Php420,000 downpayment and monthly installments of Php15,000 at
the end of each month for 4 ½ years. What is the cash price of the truck if money is worth 18% compounded
monthly?

Given: DP = Php 420 000 R = Php 15 000 t = 4½ or 4.5 years i = 0.18/12 = 0.015 m = 12 n = 54

Formula: CP = DP + R [ 1 - (1+i)-n / i ]

Solution:

CP = 420 000 + 15 000 [ 1 - (1+0.015)-⁵⁴ / 0.015 ]

CP = 420 000 + 15 000 [ 1 - (1.015)-⁵⁴ / 0.015 ]

CP = 420 000 + 15 000 ( 1 - 0.44754191776872 / 0.015 )

CP = 420 000 + 15 000 ( 0.55245808223128 / 0.015 )

CP = 420 000 + 15 000 (36.8305388154187)

CP = 420 000 + 552 458.08

CP = Php 972 458.08

3. Find the PRESENT VALUE and the AMOUNT of a Php7,500 ordinary annuity payable quarterly for 12 years if
money is worth 12.5% compounded quarterly.

Given: R = Php 7 500 m = 4 t = 12 years n = 48 i = 0.125/4 = 0.03125

Formula : S = R [ (1 + i)n - 1 / i ] and A = R [ 1 - (1+i)-n / i ]

Solution:

S = 7 500 [ (1 + 0.03125)⁴⁸ - 1 / 0.03125 ]

S = 7 500 [ (1.03125)⁴⁸ - 1 / 0.03125 ]

S = 7 500 [ 4.37996010545899 - 1 / 0.03125 ]
S = 7 500 ( 3.37996010545899 / 0.03125 )

S = 7 500 ( 108.158723374688 )

S = Php 811 190.43

A = R [ 1 - (1+i)-n / i ]

A = 7 500 [ 1 - (1+0.03125)-⁴⁸ / 0.03125 ]

A = 7 500 [ 1 - (1.03125)-⁴⁸ / 0.03125 ]

A = Php 185 204.98

iA iS
R R
Ordinary Annuity (Finding R) Formula:
1  (1  i )  n 1  i   1
n

1. Edison wants to have Php900,000 in 4 years. He makes semi-annual deposits in a savings account paying interest
at 8% compounded semi-annually. Find the semi-annual deposit.

Given: S = Php 900 000 t = 4 years m = 2 n = 8 i = 0.08/2 = 0.04

Formula: R = i S / ( 1+i )n - 1

Solution:

R = (0.04)(900 000) / ( 1+0.04 )⁸ - 1

R = 36 000 / (1.04)⁸ - 1

R = 36 000 / 1.2166529024 - 1

R = 36 000 / 0.2166529024

R = Php 137 580.34

2. A mother wishes to have Php800,000 eight years from today for her son’s graduation. How much should she
deposit monthly in a bank if it pays interest at 14%, m = 12?

Given: A = Php 800 000 t = 8 years m = 12 n = 96 i = 0.14/12 = 0.0116666666666

Formula: R = i A / 1 - ( 1+i )-n

Solution:

R = (0.04)(900 000) / 1 - ( 1+0.0116666666666 )-96

R = 9 333.33 / 1 - (1.0116666666666)-96

R = 9 333.33 / 1 - 0.3284019245769

R = 9 333.33 / 0.6715980754231

R = Php 13 897.20

3. A newly married couple bought a house and lot worth Php2.8M. They paid a downpayment of Php300,000 with
an agreement to pay the balance in 18 years at 18% compounded quarterly. How much is the quarterly
payment?

Given: A = Php 2 800 000 - Php 300 000 = Php 2 500 000 t = 18 years m = 4 n = 72 i = 0.18/4 = 0.045

Formula: R = i A / 1 - ( 1+i )-n

Solution:

R = (0.045)(2 500 000) / 1 - ( 1+0.045 )-72

R = 112 500 / 1 - (1.045)-72

R = 112 500 / 1 - 0.04203655214527

R = 112 590 / 0.95796344785473

R = Php 117 436.63

 ANNUITY (FINDING THE TERM OF OA) – ODFM1/ODFM8

 iA 
log1  
 R n (l )  (1  i ) n ( r )  1 n(r )  (1  i ) n ( r )  1
n x  A(1  i )  R  (1  i ) x  A(1  i )  R 
 log(1  i )  i   i 
iS 
log   1  1  i n ( r )  1  1  i n ( r )  1
n  D  x  S  D  (1  i ) x  S  D 
log 1  i   i   i 

1. A P28,000 debt at 15% interest compounded semi-annually is to be amortized at P2,250 every 6 months. A final smaller
payment is to be made after the last regular payment.
a. How many regular payments are needed?

A = Php 28 000 R = Php 2 250 m = 2 j = 0.15 i = 0.15/2 = 0.075

Formula: n = log [ 1 - (i A / R) / -log (1 + i)

Solution:

n = log [ 1 - ((0.075)(28 000) / 2 250) / -log (1 + 0.075)

n = log [ 1 - (2 100/2 250) / -log (1.075)

n = 37.4450418725858

n = 37

b. When will the final smaller payment be due?

On the 38th semi-annual payment.

c. How much is the final payment

n(r) = 37 n(l) = 38

Formula: x = A(1+i)n(r) - R [ (1 + i)n(l) - 1 / i ] ( 1 + i )

Solution:

x = 28 000 (1+0.075)³⁷ - 2 250 [ (1 + 0.075)³⁸ - 1 / 0.075 ] ( 1 + 0.075 )

x = 28 000 (1.075)³⁷ - 2 250 [ (1.075)³⁸ - 1 / 0.075 ] ( 1.075 )

x = Php 1 021.46

2. A company borrowed P45,200 from a savings and loan association that charges 14% converted quarterly. To pay off the loan,
the company promised to pay P2,000 every 3 months.
a. When will the company make the last P2,000 payment

After 3 months.

b. Find the final irregular payment if it is made 3 months after the last regular payment date.

Given: A = Php 45 200 R = Php 2 000 m = 4 i = 0.14/4 = 0.035

Formula: x = A(1+i)n(r) - R [ (1 + i)n(l) - 1 / i ] ( 1 + i )

n = log ( 1 - i A / R ) / -log ( 1 + i )

Solution:

n = log ( 1 - (0.035) (45 200) / 2 000 ) / -log ( 1 + 0.035 )

n = 45.504 = 45

n (r) = 45 n (l) = 46

x = 45 200 (1+0.035)⁴⁶ - 2 000 [ (1 + 0.036)⁴⁵ - 1 / 0.035 ] ( 1 + 0.035)

x = 45 200 (1.035)⁴⁶ - 2 000 [ (1.035)⁴⁵ - 1 / 0.035 ] ( 1.035 )

 x = Php 1 017.67

c. Find the final irregular payment if it is made on the day of the last regular payment.

Formula: x = A(1+i)n(r) - R [ (1 + i)n(r) - 1 / i ] ( 1 + i )

Solution:

x = 45 200 (1+0.035)⁴⁵ - 2 000 [ (1 + 0.036)⁴⁵ - 1 / 0.035 ] ( 1 + 0.035)

x = 45 200 (1.035)⁴⁵ - 2 000 [ (1.035)⁴⁵ - 1 / 0.035 ] ( 1.035 )

x = Php 6, 421.45

3. A mother deposits P15,500 each quarter in a savings bank paying 12.5% compounded quarterly. If she desires to accumulate
P175,000,
a). how many full deposits must she make?

D = P15 500 S = P175 000 m = 4 i = 0.125/4 = 0.03125

Formula: n = log [(i A / R) + 1 / log (1 + i)

Solution:

n = log [(0.03125)(175 000) / 15 500) + 1 / log (1 + 0.03125)

n = log [ 5468.75/15 500 + 1 / log (1.03125)

n = 9.82 = 9

b). How much will the final deposit be (if any) if it is made 3 months after the last full deposit of P15,500?

Formula: x = S - D [ (1+i)n(r) - 1 / i ]

Solution:

x = 175 000 - 15 500 [ (1+0.03125)⁹ - 1 / 0.03125 ]

x = 175 000 - 15 500 [ (1.03125)⁹ - 1 / 0.03125 ]

x = Php 16 729.51

c). How much will the final deposit be if it is made on the last deposit date?

Formula: x = S - D [ (1+i)n(r) - 1 / i ] ( 1 + 0.03125 )

Solution:

x = 175 000 - 15 500 [ (1+0.03125)⁹ - 1 / 0.03125 ] (1.03125)

x = 175 000 - 15 500 [ (1.03125)⁹ - 1 / 0.03125 ] (1.03125)

x = Php 11 783.56