ANNUITY,

STOCKS & BONDS,

LOANS
Ms. Louise Mangulabnan
 01 02
OBJECTIVES Define annuity, Terminologies
stocks and
In this lesson, you'll able to:
bonds

Annuity

Stocks and Bonds

Business and Consumer Loans


Annuity

Stocks and Bonds

Business and Consumer Loans

ANNUITY
An annuity is a series of equal payments
made at equal intervals of time.
Financial activities like installment
payments, monthly rentals, life-
insurance premium, monthly retirement
benefits, are familiar examples of
annuity.
 Annuity
can be
certain or
uncertain!
ANNUITY CERTAIN
The specific amount of payments
are set to begin and end at a
specific length of time. A good
example of annuity certain is the
monthly payments of a car loan Annuity
where the amount and number
of payments are known. can be
certain or
uncertain!
ANNUITY UNCERTAIN
The annuitant may be paid
according to a certain event. An
example of annuity uncertain is
life and accident insurance. In
this example, the start of Annuity
payment is not known and the
amount of payment is can be
dependent to which event.
certain or
uncertain!
 Annuity
certain
can be
classified
into two!
SIMPLE ANNUITY
The payment period is the same
as the interest period, which
means that if the payment is Annuity
made monthly the conversion of
money also occurs monthly.
certain
can be
classified
into two!
GENERAL ANNUITY
the payment period is not the
same as the interest period.
There are many situations where Annuity
the payment for example is
made quarterly but the money
certain
compounds in another period,
say monthly.
can be
classified
into two!
 Types of
Annuities
Ordinary Annuity
In an ordinary annuity, equal
payments are made at the end
of each compounding period
starting from the first
compounding period.
An ordinary annuity is a series of regular payments made at the
end of each period, such as monthly or quarterly.

Types of
Annuities
Annuity Due
In annuity due, the equal
payments are made at the
beginning of each compounding
period starting from the first
period.
A common example of an annuity due payment is rent, as landlords
often require payment upon the start of a new month as opposed
to collecting it after the renter has enjoyed the benefits of the
apartment for an entire month.
Types of
Annuities
Deferred Annuity
In deferred annuity the first
payment is deferred a certain
number of compounding periods
after the first.
A deferred annuity is a contract with an insurance company that
promises to pay the owner a regular income, or a lump sum, at
some future date.
Types of
Annuities
Perpetuity
Perpetuity is an annuity where
the payment period extends
forever, which means that the
periodic payments continue
indefinitely.
It s an annuity that has no end, or a stream of cash payments that
continues forever. There are few actual perpetuities in existence.
Real estate and preferred stockare among some types of
investments that affect the results of a perpetuity, and prices can
be established using techniques for valuing a perpetuity.

Types of
Annuities

Annuity

Stocks and Bonds

Business and Consumer Loans


Annuity

Stocks and Bonds

Business and Consumer Loans

Why do
corporations
issue common
stock?

To raise money to start or expand a business

To help pay for ongoing business expenses
They don’t have to repay the money
Dividends are not mandatory
Stockholders have voting rights
Why Do Investors
Purchase Stock?

Income from dividends

Dollar appreciation of the stock value
Increased value from stock splits
Common
vs.
Preferred Stock
Common stock
get dividends depending on profit the company
makes

Preferred stock
receive cash dividends before common
stockholders
pre-determined dividend rate
most preferred stock is callable
Bonds
These are securities that represent a debt owed by
the issuer to the investor, and typically have
specified payments on specific dates.
par value,
par,
face value

The amount which the bond bought.

Amortization

It is the process of paying a loan and interest

through series of regular equal payments.
Premium

When stocks or bonds sold at a higher price than its

par value.

Annuity

Stocks and Bonds

Business and Consumer Loans


Annuity

Stocks and Bonds

Business and Consumer Loans

 How Business Obtains Financing

Businesses need funds for a variety of reasons:

Finance permanent assets such as plant and equipment

Finance the acquisition of another business
Finance working capital—inventory or accounts receivable
 Loans are used for many reasons

Feed, seed and fertilizer purchases

Machinery,livestock,and equipment purchases
Land ,building,and home purchases
Business start up expenses like attorney fees,incorporation fees, and
product fees.
Emergencies
 Short term loans

Less than 1 year

Used to buy items like feed, seed, fertilizer, and other consumables
Referred to as an operating note
Can be financed by merchants, banks and private individuals
Interest generally calculated using simple interest method.
Used to even out highs and low in income and expenses.
 Long term loan

Used to purchase land, buildings, homes

Longer than 10 years in duration
Usually a mortgage with equal payments
Provided by commercial banks, Farm credit system, individuals,
insurance companies, and mortgage companies
 Mortgages

Mortgages are long term loans that are generally used to finance the
purchase of homes.
Mortgages are generally offered in 15 and 30 year lengths with many
options to choose from.
To do:
WT 3
PT 3