Ordinary Annuities

FDNBUSM
 Definition of Annuity

Annuity is a sequence of periodic payments

made at equal intervals of time and most of the
time in equal amounts.
 Important Terms
Payment interval – time between two consecutive
payments of annuity; equivalent to 1 period.

Term – starts immediately and ends on the last payment

interval.

Periodic Rent or Periodic Payment (R)

– size of each payment.
 ANNUIT
Y
ANNUITY CONTINGENT
CERTAIN ANNUITY
simply called “annuity” is a sequence of periodic
is one in which payments payments in which the
begin and end at definite payments extend over an
times. indeterminate length of time.

1. Ordinary Annuity – payments are made at the end of each period.

2.Annuity due – payments are made at the beginning of each period.
3.Deferred Annuity – first payment is made at some later date.
 Present Value of Ordinary Annuity (A)
A = R(1+i)-1 + R(1+i)-2 + R(1+i)-3 + … + R(1+i)-(n-1) + R(1+i)-n
-
A(1+i)-1 = R(1+i)-2 +R(1+i)-3 +R(1+i)-4 + … +R(1+i)-n +R(1+i)-n-1
A – A(1+i)-1 = R(1+i)-1 -R(1+i)-n-1

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

[1-(1+i)-1]

1 − (1 + i ) − n 
A = R• ⎡1 − (1 + i ) − n ⎤
⎡ 1 ⎤ A = R⎢
(1 + i ) ⎢1 − ⎥
⎣ 1 + i ⎥⎦ ⎣ i ⎦
 Amount of Ordinary Annuity (S)
S = R + R(1+i) + … + R(1+i)n-3 + R(1+i)n-2 + R(1+i)n-1
-
S(1+i) = R(1+i) + R(1+i)2 + … + R(1+i)n-2 +R(1+i)n-1 +R(1+i)n
S – S(1+i) = R - R(1+i)n

S[1-(1+i)] = R [1-(1+i)n]  S[1-(1+i)] = R [1-(1+i)n]

S (-i) = R [1-(1+i)n]
⎡ (1 + i ) n − 1⎤
S (i) = R [(1+i)n-1]  S = R⎢ ⎥
⎣ i ⎦
Relationship between A and S

A = S(1+i)-n

S = A(1+i)n
Example 3.1If the prevailing worth of money is 12% interest
compounded monthly, find the present value and the amount of an
annuity of P2,000 payable monthly for 10 years.

Given: j = 0.12; t = 10; m = 12; R = P2,000; n = 120; i = 0.01

Required: A and S
Solution:

⎡1 − (1 + 0.01) −120 ⎤ ⎡ (1 + 0.01)120 − 1⎤

A = 2000 ⎢ ⎥ S = 2000 ⎢ ⎥
⎣ 0 .01 ⎦ ⎣ 0. 01 ⎦
A = P139,401.04 S = P460,077.38
Self-Check Exercise 3.1Find the present value and amount of an
annuity of P13,250 payable quarterly for 2 years and 6 months at
11% compounded quarterly.To create a fund for his forthcoming
business venture, Matthew decides to deposit P5,000 at the end
of each month to his bank account. If the bank pays 1%
compounded monthly on his deposits, how much will he have at
the end of 2 years?What is the amount of a 4-year ordinary
annuity whose present value is P100,000 if money is worth
2.75% interest compounded monthly?
Self-Check Exercise 3.1 Find the present value and amount
of an annuity of P13,250 payable quarterly for 2 years and 6
months at 11% compounded quarterly.

Given: j = 0.11; t = 2.5; m = 4; R = P13,250; n = 10; i = 0.0275

Required: A and S
Solution:

⎡1 − (1 + 0.0275) −10 ⎤ ⎡ (1 + 0.0275)10 − 1⎤

A = 13250 ⎢ ⎥ S = 13250 ⎢ ⎥
⎣ 0. 0275 ⎦ ⎣ 0.0275 ⎦
A = P114,481.0092 S = P150,159.1339
Self-Check Exercise 3.1 To create a fund for his forthcoming business venture,
Matthew decides to deposit P5,000 at the end of each month to his bank account. If
the bank pays 1% compounded monthly on his deposits, how much will he have at
the end of 2 years?

Given: j = 0.01; t = 2; m = 12; R = P5,000; n = 24; i = 0.0033

Required: S
Solution:

⎡ (1 + 0.00083333) 24 − 1⎤
S = 5000 ⎢ ⎥
⎣ 0 . 00083333 ⎦
S = P121,157.0586
Self-Check Exercise 3.1 What is the amount of a 4-year ordinary
annuity whose present value is P100,000 if money is worth
2.75% interest compounded monthly?

Given: j = 0.0275; t = 4; m = 12; A = P100,000; n = 48

Required: S
Solution:

S = A(1+i)n
S = 100,000(1+0.00229166)48

S = P111,613.7596
 Cash Value or Cash Price

Cash Price = Down Payment + A

or
CP = DP + A
Example 3.2Mrs. Myrna Mendoza, a car buyer, makes a down payment of
P225,000 and pays P20,794.52 at the end of each month for 5 years to discharge all
principal and interest costs at 36% interest rate compounded monthly. Find the
equivalent cash price of the car.

Given: DP = P225,000; j = 0.36; t = 5; m = 12;

R = P20,794.52; n = 60; i = 0.03
Required: Cash Price
Solution:
Cash Price = Down Payment + A

⎡1 − (1 + 0.03) −60 ⎤
CP = 225000 + 20794.52 ⎢ ⎥
CP = P800,500.06 ⎣ 0. 03 ⎦
Self-Check Exercise 3.2 Mr. Coronacion acquired a resort by
making a P5M down payment and a sequence of P600,000
payments made at the end of each year for 5 years. If money is
worth 18% effective rate computed annually, how much is the
cash price of the resort?Mrs. Enciso paid P500,000 as down
payment for a piece of property in Tagaytay. The remaining
liability is to be settled by paying P50,000 at the end of each
month for 3 years. If money is worth 15% compounded monthly,
how much is the cash price of the property?
Self-Check Exercise 3.2 Mr. Coronacion acquired a resort by making a P5M down
payment and a sequence of P600,000 payments made at the end of each year for 5
years. If money is worth 18% effective rate computed annually, how much is the
cash price of the resort?

Given: DP = P5,000,000; j = 0.18; t = 5; m = 1;

R = P600,000; n = 5; i = 0.18
Required: Cash Price
Solution:
Cash Price = Down Payment + A

⎡1 − (1 + 0.18) −5 ⎤
CP = 5000000 + 600000 ⎢ ⎥
CP = P6,876,302.6126 ⎣ 0 .18 ⎦
Self-Check Exercise 3.2 Mrs. Enciso paid P500,000 as down payment for a piece
of property in Tagaytay. The remaining liability is to be settled by paying P50,000
at the end of each month for 3 years. If money is worth 15% compounded monthly,
how much is the cash price of the property?

Given: DP = P500,000; j = 0.15; t = 3; m = 12;

R = P50,000; n = 36; i = 0.0125
Required: Cash Price
Solution:
Cash Price = Down Payment + A

⎡1 − (1 + 0.0125) −36 ⎤
CP = 500000 + 50000 ⎢ ⎥
CP = P1,942,363.3687 ⎣ 0 .0125 ⎦
Amount of an Annuity at Any Time (Sk)

k
⎡ (1 + i ) − 1⎤
Sk = R⎢ ⎥
k = number of deposits
⎣ ior payments
⎦ made
Example 3.3At the end of each 6 months for 7 years, ABC Printing will deposit
P50,000 in a depreciation fund to provide for the replacement of its printing machinery
at the end of 7 years. If the fund accumulates at 8% compounded semi-annually, how
much is in it (a) just after the last deposit and (b) just after the 5th deposit?

Given: R = P50,000; j = 0.08; t = 7; m = 2; n = 14; i = 0.04

Required: (a) S (b) S5
Solution: (a)

⎡ (1 + 0.04)14 − 1⎤
S = 50000 ⎢ ⎥
⎣ 0 .04 ⎦
S = P914,595.56
Example 3.3At the end of each 6 months for 7 years, ABC Printing will deposit
P50,000 in a depreciation fund to provide for the replacement of its printing machinery
at the end of 7 years. If the fund accumulates at 8% compounded semi-annually, how
much is in it (a) just after the last deposit and (b) just after the 5th deposit?

Given: R = P50,000; j = 0.08; t = 7; m = 2; n = 14; i = 0.04

Required: (a) S (b) S5
Solution: (b)

⎡ (1 + 0.04) 5 − 1⎤
S5 = 50000 ⎢ ⎥
⎣ 0 .04 ⎦
S5 = P270,816.13
Self-Check Exercise 3.3If Mark deposits P3,000 at the end of
every 3 months to a bank that pays 2.5% compounded quarterly,
how much is credited to his account just after his 20th deposit?In
preparation for the college education of her son, Mrs. Calara will
deposit P2,400 at the end of each month for 5 years in a fund
earning 4.5% compounded monthly. How much is in the fund (a)
just after the 15th deposit and (b) just after the last deposit?
Self-Check Exercise 3.3 If Mark deposits P3,000 at the end of
every 3 months to a bank that pays 2.5% compounded quarterly,
how much is credited to his account just after his 20th deposit?

Given: R = P3,000; j = 0.025; m = 4; k = 20; i = 0.00625

Required: S20
Solution:

⎡ (1 + 0.00625) 20 − 1⎤
S 20 = 3000 ⎢ ⎥
⎣ 0 .00625 ⎦
S20 = P63,699.7144
Self-Check Exercise 3.3In preparation for the college education of her son, Mrs.
Calara will deposit P2,400 at the end of each month for 5 years in a fund earning
4.5% compounded monthly. How much is in the fund (a) just after the 15 th deposit
and (b) just after the last deposit?

Given: R = P2,400; j = 0.045; t = 5; m = 12; n = 60; i = 0.00375

Required: (a) S15 (b) S
Solution: (a)

⎡ (1 + 0.00375)15 − 1⎤
S15 = 2400 ⎢ ⎥
⎣ 0 . 00375 ⎦
S15 = P36,960.5304
Self-Check Exercise 3.3In preparation for the college education of her son, Mrs.
Calara will deposit P2,400 at the end of each month for 5 years in a fund earning
4.5% compounded monthly. How much is in the fund (a) just after the 15 th deposit
and (b) just after the last deposit?

Given: R = P2,400; j = 0.045; t = 5; m = 12; n = 60; i = 0.00375

Required: (a) S15 (b) S
Solution: (b)

⎡ (1 + 0.00375) 60 − 1⎤
S = 2400 ⎢ ⎥
⎣ 0 .00375 ⎦
S = P161,149.3251
Remaining liability just after the kth payment
(RLk)

⎡1 − (1 + i ) − ( n − k ) ⎤
RLk = R ⎢ ⎥
⎣ i ⎦
Remaining liability just before the kth payment
(kRL)

k RL = R + RLk
Example 3.4Michael bought a laptop and paid P10,000 as down payment plus P3,000
at the end of each month for a year. If money is worth 24% converted monthly, find
(a) the cash price of the laptop,(b) Michael’s remaining liability just after his 5 th
installment and (c) his remaining liability just before he pays his 7 th installment.

Given: DP = P10,000; R = P3,000; t = 1; m = 12; n = 12; i = 0.02

Required: (a) CP (b) RL5 (c) 7RL
Solution: (a)
CP = DP + A
⎡1 − (1.02) −12 ⎤
CP = 10000 + 3000 ⎢ ⎥
⎣ 0 .02 ⎦
CP = P 41,726.02
Example 3.4Michael bought a laptop and paid P10,000 as down payment plus P3,000
at the end of each month for a year. If money is worth 24% converted monthly, find
(a) the cash price of the laptop,(b) Michael’s remaining liability just after his 5 th
installment and (c) his remaining liability just before he pays his 7 th installment.

Given: DP = P10,000; R = P3,000; t = 1; m = 12; n = 12; i = 0.02

Required: (a) CP (b) RL5 (c) 7RL
Solution: (b)

⎡1 − (1.02) − (12−5) ⎤
RL5 = 3000 ⎢ ⎥
⎣ 0.02 ⎦
RL5 = P19,415.97
Example 3.4Michael bought a laptop and paid P10,000 as down payment plus P3,000
at the end of each month for a year. If money is worth 24% converted monthly, find
(a) the cash price of the laptop,(b) Michael’s remaining liability just after his 5 th
installment and (c) his remaining liability just before he pays his 7 th installment.

Given: DP = P10,000; R = P3,000; t = 1; m = 12; n = 12; i = 0.02

Required: (a) CP (b) RL5 (c) 7RL
Solution: (c)
7 RL = R + RL 7
⎡1 − (1.02) −(12−7 ) ⎤
7 RL = 3000 + 3000 ⎢ ⎥
⎣ 0 .02 ⎦
7 RL = P17,140.38
Self-Check Exercise 3.4A flat screen TV can be purchased with
payments of P12,500 at the end of each month for 2 years. If
money is worth 18% compounded monthly, find (a) the cash
price; (b) the remaining liability just after the 7 th payment; (c) the
remaining liability just before the 17th payment.In return for a
loan, Mr. Domingo promises to pay P15,000 at the end of each 3
months for two years. If money is worth 10% converted
quarterly, find (a) the principal borrowed; (b) his remaining
liability just before his 3rd payment; (c) his remaining liability
just after the 5th payment.
Self-Check Exercise 3.4 A flat screen TV can be purchased with payments of
P12,500 at the end of each month for 2 years. If money is worth 18% compounded
monthly, find (a) the cash price; (b) the remaining liability just after the 7 th
payment; (c) the remaining liability just before the 17 th payment.

Given: DP = 0; R = P12,500; t = 2; j = 0.18; m = 12; n = 24; i = 0.015

Required: (a) CP (b) RL7 (c) 17RL
Solution: (a)
CP = DP + A
⎡1 − (1.015) − 24 ⎤
CP = 0 + 12500 ⎢ ⎥
⎣ 0 . 015 ⎦
CP = P 250,380.0671
Self-Check Exercise 3.4 A flat screen TV can be purchased with payments of
P12,500 at the end of each month for 2 years. If money is worth 18% compounded
monthly, find (a) the cash price; (b) the remaining liability just after the 7 th
payment; (c) the remaining liability just before the 17 th payment.

Given: DP = 0; R = P12,500; t = 2; j = 0.18; m = 12; n = 24; i = 0.015

Required: (a) CP (b) RL7 (c) 17RL
Solution: (b)

⎡1 − (1.015) − ( 24−7 ) ⎤
RL 7 = 12500 ⎢ ⎥
⎣ 0 . 015 ⎦
RL 7 = P186,345.6163
Self-Check Exercise 3.4 A flat screen TV can be purchased with payments of
P12,500 at the end of each month for 2 years. If money is worth 18% compounded
monthly, find (a) the cash price; (b) the remaining liability just after the 7 th
payment; (c) the remaining liability just before the 17 th payment.

Given: DP = 0; R = P12,500; t = 2; j = 0.18; m = 12; n = 24; i = 0.015

Required: (a) CP (b) RL7 (c) 17RL
Solution: (c)
17 RL = R + RL17
⎡1 − (1.015) −( 24−17 ) ⎤
17 RL = 12500 + 12500 ⎢ ⎥
⎣ 0 .015 ⎦
17 RL = P94,977.6745
Self-Check Exercise 3.4In return for a loan, Mr. Domingo promises to pay P15,000
at the end of each 3 months for two years. If money is worth 10% converted
quarterly, find (a) the principal borrowed; (b) his remaining liability just before his
3rd payment; (c) his remaining liability just after the 5 th payment.

Given: R = P15,000; t = 2; j = 0.10; m = 4; n = 8; i = 0.025

Required: (a) A (b) 3RL (c) RL5
Solution: (a)

⎡1 − (1 + 0.025) −8 ⎤
A = 15000 ⎢ ⎥
⎣ 0.025 ⎦
A = P107,552.0575
Self-Check Exercise 3.4In return for a loan, Mr. Domingo promises to pay P15,000
at the end of each 3 months for two years. If money is worth 10% converted
quarterly, find (a) the principal borrowed; (b) his remaining liability just before his
3rd payment; (c) his remaining liability just after the 5 th payment.

Given: R = P15,000; t = 2; j = 0.10; m = 4; n = 8; i = 0.025

Required: (a) A (b) 3RL (c) RL5
Solution: (b)
3 RL = R + RL3
⎡1 − (1.025) −(8−3) ⎤
3 RL = 15000 + 15000 ⎢ ⎥
⎣ 0 .025 ⎦
3 RL = P84,687.4274
Self-Check Exercise 3.4In return for a loan, Mr. Domingo promises to pay P15,000
at the end of each 3 months for two years. If money is worth 10% converted
quarterly, find (a) the principal borrowed; (b) his remaining liability just before his
3rd payment; (c) his remaining liability just after the 5 th payment.

Given: R = P15,000; t = 2; j = 0.10; m = 4; n = 8; i = 0.025

Required: (a) A (b) 3RL (c) RL5
Solution: (c)

⎡1 − (1.025) − (8−5) ⎤
RL5 = 15000 ⎢ ⎥
⎣ 0.025 ⎦
RL5 = P 42,840.3534
Periodic Payment given the Present Value A

⎡1 − (1 + i ) − n ⎤ Ai
A = R⎢ ⎥→R= −n
⎣ i ⎦ 1 − (1 + i )
Periodic Payment given the Amount S

n
⎡ (1 + i ) − 1⎤ Si
S = R⎢ ⎥→R= n
⎣ i ⎦ (1 + i ) − 1
Example 3.6Mrs. Anonas acquired a loan of P50,000 from a credit union that
charged an interest of 16% compounded quarterly. She promised to settle her
obligation by making quarterly payments for 3 years. Find her quarterly
payment.

Given: A = P50,000; j = 0.16; t = 3; m = 4; n = 12; i = 0.04

Required: R
Solution:

Ai 50000(0.04)
R= −n
→R= −12
1 − (1 + i ) 1 − (1.04)
R = P5,327.61
Example 3.7To create a fund for the purchase of a brand new car, Frances will
make equal monthly deposits to a bank that pays [4%, m = 12] for 5 years. If she
intends to buy a car that will cost her P700,000, how much should she deposit
monthly to the bank.

Given: S = P700,000; j = 0.04; t = 5; m = 12; n = 60; i = 0.0033

Required: R
Solution:

Si 700000(0.00 3 3 )
R= n
→R= 60
(1 + i ) − 1 (1 + 0.00 3 3 ) − 1
R = P10,558.23
Self-Check Exercise 3.5Mrs. Cristina Joaquin borrows P50,000
and agrees to discharge her liability as to principal and interest by
paying equal sums at the end of each 6 months for 8 years. If
money is worth 6 ½% compounded semi-annually, how much is
her semi-annual payment?At the end of each year for 10 years,
LMN Corporation will deposit equal sums to a depreciation fund
to provide for the replacement of its machinery worth P500,000.
If the fund accumulates at 2% effective rate, how much must the
corporation deposit?
Self-Check Exercise 3.5 Mrs. Cristina Joaquin borrows P50,000 and agrees to
discharge her liability as to principal and interest by paying equal sums at the end
of each 6 months for 8 years. If money is worth 6 ½% compounded semi-annually,
how much is her semi-annual payment?

Given: A = P50,000; j = 0.065; t = 8; m = 2; n = 16; i = 0.0325

Required: R
Solution:

Ai 50000(0.0325)
R= −n
→R= −16
1 − (1 + i ) 1 − (1.0325)
R = P4,057.0066
Self-Check Exercise 3.5 At the end of each year for 10 years, LMN Corporation
will deposit equal sums to a depreciation fund to provide for the replacement of its
machinery worth P500,000. If the fund accumulates at 2% effective rate, how
much must the corporation deposit?

Given: S = P500,000; w = 0.02; t = 10; m = 1; n = 10; i = 0.02

Required: R
Solution:

Si 500000(0.02)
R= n
→R= 10
(1 + i ) − 1 (1 + 0.02) − 1
R = P45,663.2639
Solving for time t given the Present Value A
−n
⎡1 − (1 + i ) ⎤
A = R⎢ ⎥
⎣ i ⎦
⎛ Ai ⎞ ⎛ Ai ⎞
log⎜1 − ⎟ log⎜1 − ⎟
⎝ R⎠ ⎝ R⎠
n=− →t =−
log(1 + i ) m log(1 + i )
Solving for time t given the Amount S
n
⎡ (1 + i ) − 1⎤
S = R⎢ ⎥
⎣ i ⎦
⎛ Si ⎞ ⎛ Si ⎞
log⎜1 + ⎟ log⎜1 + ⎟
⎝ R⎠ ⎝ R⎠
n= →t =
log(1 + i ) m log(1 + i )
Example 3.8Mrs. Gina Joaquin needs a fund of P900,000 to expand her house. To provide for this, she will place
P10,000 at the end of each month in an investment that pays [16%, m = 12]. (a) When will the fund accumulate to at
least P900,000? (b) How many full investments of P10,000 are required? (c) How much must be added to the
accumulated investment on the last month to complete the P900,000 needed for the expansion of the house? (d) How
much must be added to the last regular deposit of P10,000 to complete the P900,000 on that date?

Given: S = P900,000; R = P10,000; j = 0.16; m = 12; i = 0.0133

 Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Required:
(a) t
(b) Number of full investments of P10,000
(c) The amount of money that must be deposited on the last month
to complete the P900,000 needed for the repair of the house
(d) The amount of money that must be added to the last regular
deposit to complete the P900,000 on that date
 Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Solution:
(a) n ⎛ ⎛ 0.04 ⎞ ⎞
⎜ 900000⎜ ⎟⎟
⎜ ⎝ 3 ⎠⎟
log 1 +
⎛ Si ⎞ ⎜ 10000 ⎟
log⎜1 + ⎟ ⎜ ⎟
⎝ R⎠ ⎝ ⎠
n= =
log(1 + i ) ⎛ 0.04 ⎞
log⎜1 + ⎟
⎝ 3 ⎠
n = 59.53
t = n / m = 59.53 / 12 = 4.9608 years
Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Solution:
(b) Number of full investments of P10,000
The integral part of n is 59, thus the number of full payments is
59.
Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Solution:
(c) The amount of money that must be deposited on the last month to complete the
P900,000 needed for the repair of the house
Let x be the amount needed to complete the P900,000 on the 60 th month.

⎛ 0.04 ⎞
S59 ⎜1 + ⎟ + x = 900000
⎝ 3 ⎠
⎡ ⎛ 0.04 ⎞59 ⎤
⎢ ⎜1 + ⎟ − 1⎥
⎢ ⎝ 3 ⎠ ⎥ ⎛ 0.04 ⎞
10000 ⎜1 + ⎟ + x = 900000
⎢ 0.04 ⎥⎝ 3 ⎠
⎢ 3 ⎥
⎣ ⎦
Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Solution:
(c) The amount of money that must be deposited on the last month to complete the
P900,000 needed for the repair of the house
Let x be the amount needed to complete the P900,000 on the 60 th month.

⎛ 0.04 ⎞
888508.38⎜1 + ⎟ + x = 900000
⎝ 3 ⎠
900355.16 + x = 900000
x = 900000 − 900355.16
x = − P355.16
Given: S = P900,000; R = P10,000; j = 0.16; m = 12;
i = 0.0133
Solution:
(d) The amount of money that must be added to the last regular
deposit to complete the P900,000 on that date

S59 + x = 900000
888508.38 + x = 900000
x = 900000 − 888508.38
x = P11491.62
 Solving for Rate j
IfAisgiven,
⎛ nR ⎞
(n 2 − 1)i 2 + 6(n + 1)i + 12⎜1 − ⎟=0
⎝ A⎠
IfSisgiven,
2 2 ⎛ nR ⎞
(n − 1)i − 6(n − 1)i + 12⎜1 − ⎟=0
⎝ S ⎠
ai 2 + bi + c = 0
− b ± b 2 − 4ac
i=
2a
j
i=
m
Example 3.9If deposits of P500 made at the end of each month
for 4 years accumulate to P25,465.60, find the rate at which
money accumulates monthly.

Given: S = P25,465.60; R = P500; t = 4; m = 12; n = 48

Required: j
Solution:
2 2 ⎛ nR ⎞
(n − 1)i − 6(n − 1)i + 12⎜1 − ⎟=0
⎝ S ⎠
2 2 ⎛ (48)(500) ⎞
(48 − 1)i − 6(48 − 1)i + 12⎜1 − ⎟=0
⎝ 25465.60 ⎠
Example 3.9If deposits of P500 made at the end of each month
for 4 years accumulate to P25,465.60, find the rate at which
money accumulates monthly.

Given: S = P25,465.60; R = P500; t = 4; m = 12; n = 48

Required: j
Solution:
2303i 2 − 282i + 0.69 = 0
− (−282) ± (282) 2 − 4(2303)(0.69)
i=
2(2303)
i = 0.12
i = 0.0025
Example 3.9If deposits of P500 made at the end of each month
for 4 years accumulate to P25,465.60, find the rate at which
money accumulates monthly.

Given: S = P25,465.60; R = P500; t = 4; m = 12; n = 48

Required: j
Solution:
i = 0.12 i = 0.0025
⎡ (1 + 0.12) 48 − 1⎤ ⎡ (1 + 0.0025) 48 − 1⎤
S = 500 ⎢ ⎥ S = 500 ⎢ 0 .0025
⎥
⎣ 0.12 ⎦ ⎣ ⎦
S = P995794.14 S = P 25465.60
j = (0.0025)(12) = 0.03