GENERAL

MATHEMATICS

WEEK 4 – Q2
ANNUITY DUE
*An annuity due involves a series of equal payments
made at the beginning of each payment period.

*The term of an annuity due begins from the time

the first periodic payment is made and ends one
period after the last periodic payment.

*The amount of an annuity due is the value of the

annuity at the end of the term.
 The amount of annuity due is determined by using

S= -R
where: S = amount of annuity due
R = amount of periodic payment
i = rate of interest per conversion period
n = number of payment periods
Examples.
1. Mr. Dela Cruz has been investing Php 5 000 at
the beginning of each quarter in a savings
account for the past 5 years. If the bank is
paying 8% compounded quarterly, how much is
the balance in his savings account and the
interest earned at the end of 5 years?

Given:
R = Php 5 000
n= 20 (5 years x 4)
i = 0.02 ( 8%/4 = 2% or 0.02)
Solution:
 a. S = - R
S = - Php 5 000
S = - Php 5 000
S = Php 123 916. 59

b. Interest earned after 5 years

I= S – sum of payments
I = Php 123 916.59 – ( Php 5 000 x 20)
I = Php 123 916.59 – Php 100 000
I = Php 23 916.59
2. Find the amount of the a) annuity due, b)
interest earned for 6 years if the quarterly
periodic payment is Php 12 5000 at 8.4%
compounded quarterly.

Given:
R = Php 12 500
n = 24 (6 years x 4 periods per year)
i = 8.4%/4 = 2.1% = 0.021
Solution
 
a. S = - R
S = - Php 12 500
S = - Php 12 500
S = Php 393 031.89

b. Interest earned after 5 years

I= S – sum of payments
I = Php 393 031.89– ( Php 12 500x 24)
I = Php 393 031.89– Php 300 000
I = Php 93 031.89
 PRESENT VALUE OF AN ANNUITY DUE
-the present value of an annuity due is the
value at the beginning of the annuity,
including the initial payment

-the term annuity due has one payment

more than that of an ordinary annuity
 We use the formula:
A= R+

where:
A= present value of annuity due
R= amount of periodic payment
i= rate of interest per conversion period
n= number of payment periods
Examples:
1. Find the present value of an annuity due
whose periodic payment of Php 12 000 is
payable per quarter at 8% compounded
quarterly for 5 years.

Given:
R = Php 12 000
n = 20 (5 years x 4 periods per year)
i= 8% /4 = 2% = 0.02
 
Solution:
A= R+
A = Php 12 000 +
A = Php 12 000 +
A = 200 141.54
  FINDING THE TERM OF AN ANNUITY DUE
We use the formulas:
a. n = - + 1

b. n = + 1
Example:
John invested Php 1000 at the beginning for every 6 months at 8% compounded semi-annually . If the fund accumulates Php 12 500
how many periodic deposits did she make?

Given:
S = Php 12 500
R = Php 1 000
i = 8% / 2 = 4% = 0.04
 
Solution:
n= +1
n= +1

n=
n = 12
 FINDING THE RATE OF AN ANNUITY DUE

We use the following formulas:

a. =

b. =

  
DEFERRED
ANNUITIES
- a deferred annuity is an ordinary annuity of n
periods whose term begins d periods

Examples:
a. salary loans obtained from government
agencies like GSIS
b. salary loan from SSS, Pag-ibig and others
INTERVAL OF DEFERMENT
-the length of time between the present
and the beginning of the term in a
deferred annuity
- this interval of deferment ends one
period before the first payment is due
 To obtained the present value of a deferred annuity
is

A (def) =R[-]

where: A (def) = present value of deferred annuity

R = periodic payment
n = number of periodic payments
i = periodic rate of interest
d = number of deferment periods
Examples;
 
1. If money is worth 8% compounded semi-
annually, find the present value of 10 semi-
annual payment of Php 12 000 each, the
first payment is due in 5 ¼ years.

Given:
R = Php 12 000
n = 10
i = 8% 2 = 4 % or 0.04
d = 10
The
  first payment is due in 11 periods and payment is
made at the end of the period.
Solution:
A (def) = R [ - ]
A (def) = Php 12 000 [ - ]
A (def) = Php 12 000 [ - ]
A (def) = Php 12 000 ( 13. 590326- 8.110896]
A (def) = Php 65 753.16
 2. If the interest rate is 9% compounded
monthly, find the present value of 24
monthly payments of Php 1 000 each, the
first due at the end of 3 months.

Given:
R = Php 1 000
n = 24
i = 9% 12 = % or 0.0075
d=2
 
The first payment is due at the end of the 3rd
month
A (def) = R [ - ]
A (def) = Php 1 000 [ - ]
A (def) = Php 1 000 [ - ]
A (def) = Php 1 000 ( 23. 542189- 1.977723]
A (def) = Php 21 564.47
Activity 2.7
Solve the following problems. (Round amounts to the
nearest centavo. Box your final answer.
A. Ordinary Annuities
1. Calculate the future value of an ordinary annuity
of which periodic deposit is Php 7 000 at 8%
compounded semi-annually for 6 compounding
periods.
2. Find the yearly compound interest and the
balance at the end of each year of an ordinary
annuity with annual payment of Php 25 000, interest
rate of 8 ½% compounded annually and term of 3
years.
B. Annuity Due
1. Find the amount of interest earned of
each annuity dues:
a. annuity payment of Php 15 800 payable
at the start of every 3 months at 8%
compounded quartery for 4 years.
b. annual payment of Php 21 800 at 5%
compounded annually for 25 years.
2. How much will the amount of an annuity
due whose periodic payment of Php 8 000
will be paid quarterly at 6 ½% for 12 years?
 GENERAL
ANNUITIES
Two Classifications of General Annuities
1. General annuity – is an annuity whose
first payment is made at the end of
each payment interval
2. General annuity due – is an annuity
whose first payment is made at the
start of each payment interval
AMOUNT OF GENERAL ORDINARY ANNUITY
- the amount or final value of a general
ordinary annuity is the sum of all
payments and the accumulated interests
The
  amount of a general ordinary annuity is calculated using
S (go) = R (go) [ ]
where:
S (go) = amount of general ordinary annuity
R = amount of periodic payment
n= total number of compounding periods
r = rate of interest per year
i= interest rate per compounding period
m = number of compounding periods for one year
c= number of months per compounding period
p= number of months per payment interval
k = number of compounding periods per payment interval
Examples:
 
1. Find the amount of a general ordinary annuity of Php
4 000 payable at the end of each month for 5 years at
8% compounded quarterly.

Given:
R (go) = Php 4 000 n = txm p = 1 month
i= r m n=5x4 c = 3 months (quarterly)
i= 8% 4 n = 20 k=p
i= 2% or 0.02 k = 1/3
 S (go) = R (go) [ ]
S (go) = Php 4 000 [ ]
S (go) = Php 4 000 [ ]
S (go) = Php 4000 ( 73.37591349)
S (go) = Php 293 503. 65

Therefore, the amount of the general ordinary

annuity is Php 293 503.65
2.
  A man will deposit Php 12 000 at the end of every 6
months for the next 10 years in a general ordinary
annuity that pays 6% interest compounded quarterly.
Find the amount of the annuity at the end of 10 years.

Given:
R (go) = Php 12 000 n = txm p = 6 months
i= r m n = 10 x 4 c = 3 months (quarterly)
i= 6% 4 n = 40 k=p
i= 1.5% or 0.015 k=2
 S (go) = R (go) [ ]
S (go) = Php 12 000 [ ]
S (go) = Php 12 000 [ ]
S (go) = Php 12 000 ( 26.93195725)
S (go) = Php 323 183.49

Therefore, the amount of the general ordinary

annuity is Php 323 183.49
PRESENT VALUE OF A GENERAL ORDINARY
ANNUITY

The present value of a general ordinary

annuity is the sum of money today which if
invested at a specified rate will amount to
all the payments and the compound
interests at the end of the term of the
annuity
 
The present value of a general ordinary
annuity is calculated by:

A (go) =R (go) []
Examples:

 
1. Find the present value of a general ordinary annuity of Php 3 000 payable at the end of each month for 6 years at 8% compounded quarterly.

Given:

R (go) = Php 3 000 n = txm p = 1 month

i= r m n=6x4 c = 3 months (quarterly)
i= 8% 4 n = 24 k=p
i= 2% or 0.02 k = 1/3
 A (go) =R (go) []

A (go) = 3 000 [ ]

A (go) = 3 000 [ ]
A (go) = 3 000 ( 57.11838668)
A(go) = Php 171 355.16
2.
  If money is worth 6% compounded quarterly, find the
present value of a general ordinary annuity where Php 12 000
is payable every end of 6 months for 15 years.

Given:
R (go) = Php 12 000 n = txm p = 6 months
i= r m n = 15 x 4 c = 3 months (quarterly)
i= 6% 4 n = 60 k=p
i= 1.5% or 0.015 k = 63 = 2
 A (go) =R (go) []

A (go) = 12 000 [ ]

A (go) = 12 000 [ ]
A (go) = 12 000 ( 19.54355775)
A(go) = Php 234 522.69
 PERIODIC PAYMENT OF AMOUNT OF
GENERAL ORDINARY ANNUITY

This is calculated using:

R (go) =S (go) []
Examples:
 
1. Find the periodic payment of a general ordinary
annuity payable every end of the month for 5 years. IF
the accumulated value is Php 150 000 at 8%
compounded quarterly.

Given:
S (go) = Php 150 000 n = txm p = 1 month
i= r m n=5x4 c = 3 months (quarterly)
i= 8% 4 n = 20 k=p
i= 2% or 0.02 k = 1/3
 
R (go) = S (go) [ ]
R (go) = 150 000[ ]

R (go) = 150 000 [ ]

R (go) = 150 000 (

R (go) = Php 3 037.67

2.
  How much is the periodic payment payable every end of a
six months of a general ordinary annuity whose accumulated
value is Php 400 000 after 10 years at 6% compounded
quarterly?

Given:
S(go) = Php 400 000 n = txm p = 6 months
i= r m n = 10 x 4 c = 3 months (quarterly)
i= 6% 4 n = 40 k=p
i= 1.5% or 0.015 k=2
 R (go) = S (go) [ ]

R (go) = 400 000[ ]

R (go) = 400 000 [ ]

R (go) = 400 000 (

R (go) = Php 46 946.06

 PERIODIC PAYMENT OF PRESENT VALUE
OF GENERAL ORDINARY
ANNUITY

This is calculated using:

R (go) = A (go) [ ]
Example:
 
Find the periodic payment of a general ordinary annuity payable
every end of the month for 10 years if the present value is Php
200 000 at 8% compounded quarterly.

Given:
A(go) = Php 200 000 n = txm p = 1 month
i= r m n = 10 x 4 c = 3 months (quarterly)
i= 8% 4 n = 40 k=p
i= 2% or 0.02 k = 1/3
 
R (go) = A (go) [ ]
R (go) = 200 000[ ]
R (go) = 200 000( )
R (go) = 200 000 ( 0.01210491)
R (go) = Php 2 420.98
AMOUNT OF A GENERAL ANNUITY DUE

The amount of a general annuity due is

the sum of all payments from the
beginning of the payment period plus the
accumulated interests where the number
of compounding periods is increased by 1.
The term of a general annuity due begins
from the time the first periodic payment.

r 
  will use the:
We
S (gdue) = R (gdue) [ ] [+i]
Example:
 
Find the amount of a general annuity due of Php 3 000 payable at
the beginning of each month for 5 years at 8% compounded
quarterly.

Given:
R(gdue) = Php 3 000 n = txm p = 1 month
i= r m n=5x4 c = 3 months (quarterly)
i= 8% 4 n = 20 k=p
i= 2% or 0.02 k = 1/3
S  (gdue) = R (gdue) [ ] [+i]
S (gdue) = 3 000 [ ] [+0.02]
S (gdue) = 3 000[ ] [+0.02]
S (gdue) = 3 000 ( ) (
S (gdue) = Php 221 585.60
 PRESENT VALUE OF A GENERAL ANNUITY DUE

The present value of a general annuity due is

the value at the beginning of the annuity,
including the initial payment. The term of a
general annuity due has one payment more
than that of a general ordinary annuity.

To calculate we use:
A (gdue) = R (gdue) [ ] [+i]
Find
  the present value of a general annuity due of Php 4 000
payable at the beginning of each 6 months for 10 years at 8%
compounded quarterly.

Given:
R(gdue) = Php 4 000 n = txm p = 6 months
i= r m n = 10 x 4 c = 3 months (quarterly)
i= 8% 4 n = 40 k=p
i= 2% or 0.02 k=2
 
A (gdue) = R (gdue) [ ] [+i]
A (gdue) = 4 000[ ] [+0.02]
A (gdue) = 4 000 (27.355479) [+0.02]

A (gdue) = 4 000 ( 27.355479)(0.51504951)

A (gdue) = Php 56 357.70
 
PERIODIC PAYMENT OF AMOUNT OF
GENERAL ANNUITY DUE

We use:
R (gdue)=
Find
  the periodic payment of a general annuity due payable at
the beginning of each month for 5 years if the accumulated
value is Php 180 000 at 6% compounded quarterly.

Given:
S(gdue) = Php 180 000 n = txm p =1month
i= r m n=5x4 c = 3 months (quarterly)
i= 6% 4 n = 20 k=p
i= 1.5% or 0.015 k = 1/3
 R (gdue) =
R (gdue) =
R (gdue) =

R (gdue) =
R (gdue) = Php 2 569.10
 PERIODIC PAYMENT OF PRESENT VALUE
OF GENERAL ANNUITY DUE

This is calculated using:

R (gdue) =
Find
  the periodic payment of a general annuity due payable at
the beginning of each month for 10 years if the present value is
Php 145 000 and money is worth 6% compounded quarterly.

Given:
A(gdue) = Php 145 000 n = txm p =1 month
i= r m n = 10 x 4 c = 3 months (quarterly)
i= 6% 4 n = 40 k=p
i= 1.5% or 0.015 k = 1/3
 R (gdue) =
R (gdue) =

R (gdue) =

R (gdue) =

R (gdue) = Php 1 599.67