GENERAL MATHEMATICS

MATHEMATICS of
INVESTMENT
Simple Annuities
SECOND QUARTER
Week 3 Lesson 2
 GENERAL MATHEMATICS
LEARNING TARGETS
I can:
❑ distinguish between simple and general
annuities
❑ illustrate simple annuities
❑ identify the future value and present value of
simple annuities
 GENERAL MATHEMATICS
REVIEW CONCEPTS
Identify the term being described in each statement.
1. An annuity in which the periodic payment is made at
ANNUITY
DUE the beginning of each payment interval.
2. An annuity in which the periodic payment is made at
ORDINARY the end of each payment interval.

3. An annuity in which the periodic payment is not made

DEFERRED
at the beginning nor at the end of each payment
interval
UNCERTAIN
4. An annuity payable for an indefinite duration;
dependent on some certain duration
CERTAIN
5. An annuity payable for an definite duration
 GENERAL MATHEMATICS
REVIEW CONCEPTS
Identify whether the problem involves simple or general annuity
AND ordinary annuity or annuity due.
1. Victor borrows money from a cooperative to buy a
cellphone. He is repaying the loan in equal monthly
payments of Php 1,191.22 for 1.5 years at the start of
each month. If he is charged 10% interest
compounded monthly, how much did Victor borrow
from cooperative? SIMPLE , ANNUITY DUE
2. Reign decided to save Php 300 at the end of each
month. If the bank pays 10% compounded monthly,
how much will her money be at the end of 3 years?
SIMPLE ,ORDINARY
 GENERAL MATHEMATICS
REVIEW CONCEPTS
Identify whether the problem involves simple or general annuity
AND ordinary annuity or annuity due.
3. Andrei’s parents saved for his college education by
investing Php 12,000 at the beginning of each year in
an education plan that earns 6% per year
SIMPLE,of
compounded annually. What is the total amount
investment at the end of 16 years? ANNUITY DUE
4. Fernan borrows money to buy a motorcycle. He will
repay the loan by making monthly payments of 1500
php every end of month for the next 24 months at an
interest rate of 9% per year compounded monthly.
How much did Fernan borrow? SIMPLE ,ORDINARY
 GENERAL MATHEMATICS
CONCEPTS
COMPOUND VS. ANNUITY
INTEREST Suppose Mr. and Mrs. Mariano
deposits Php20,000 at the end
Suppose Mr. and Mrs.
of each year for 5 years in an
Mariano deposits Php 20,000
investment account that earns
that earns 10% compounded
10% per year compounded
annually. What would be the
annually. What would be the
amount after 5 years?
amount after 5 years?
 GENERAL MATHEMATICS
CONCEPTS
❑ FUTURE VALUE – the total accumulation of the
payments and interest earned

❑ PRESENT VALUE – the principal that must be

invested today to provide the regular payments of
an annuity
 GENERAL MATHEMATICS
SIMPLE ORDINARY ANNUITY
𝒓 𝒏𝒕
𝟏+ −𝟏
𝑭𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
Where
FV = Future Value
P = Periodic Payment
r = annual rate
n = no. of conversion periods in a year
t = no. of years
 GENERAL MATHEMATICS
SIMPLE ORDINARY ANNUITY
𝒓 −𝒏𝒕
𝟏− 𝟏+
𝑷𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
Where
PV = Present Value
P = Periodic Payment
r = annual rate
n = no. of conversion periods in a year
t = no. of years
 GENERAL MATHEMATICS
EXAMPLES
Suppose Mr. and Mrs. Mariano deposits Php 20,000 at the end of each
year for 5 years in an investment account that earns 10% per year
compounded annually. What would be the amount after 5 years?

𝒓 𝒏𝒕 SIMPLE ORDINARY ANNUITY

𝟏+ −𝟏
𝑭𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
𝟎. 𝟏𝟎 (𝟏)(𝟓)
𝟏+ −𝟏
𝟏
𝑭𝑽 = 𝟐𝟎𝟎𝟎𝟎 ∙ = 𝟏𝟐𝟐 𝟏𝟎𝟐
𝟎. 𝟏𝟎
𝟏
After 5 years, the investment will become Php 122,102.
 GENERAL MATHEMATICS
EXAMPLES
If you pay Php 50 at the end of each month for 40 years on account
that pays interest at 10% compounded monthly, how much money do
you have after 40 years?

𝒓 𝒏𝒕 SIMPLE ORDINARY ANNUITY

𝟏+ −𝟏
𝑭𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
𝟎. 𝟏𝟎 (𝟏𝟐)(𝟒𝟎)
𝟏+ −𝟏
𝟏𝟐
𝑭𝑽 = 𝟓𝟎 ∙ = 𝟑𝟏𝟔 𝟐𝟎𝟑. 𝟗𝟕𝟗
𝟎. 𝟏𝟎
𝟏𝟐
After 40 years, the amount will become Php 316,203.98.
 GENERAL MATHEMATICS
EXAMPLES
Rose works very hard because she wants to have enough money in her
retirement account when she reaches the age 60. She wants to
withdraw Php 36,000 every 3 months for 20 years starting 3 months after
she retires. How much must Rose deposit at retirement at 12% per year
compounded quarterly for the annuity? (Assume that the payments are
made at the end of each quarter) SIMPLE ORDINARY ANNUITY
−𝒏𝒕 −(𝟒)(𝟐𝟎)
𝒓 𝟎. 𝟏𝟐
𝟏− 𝟏+ 𝟏− 𝟏+
𝑷𝑽 = 𝑷 ∙ 𝒏 𝟒
𝒓 = 𝟑𝟔𝟎𝟎𝟎 ∙
𝟎. 𝟏𝟐
𝒏 𝟒
= 𝟏 𝟎𝟖𝟕 𝟐𝟐𝟕. 𝟒𝟖𝟒

She must deposit an approximate amount of Php 1,087,227.48.

 GENERAL MATHEMATICS
SIMPLE ANNUITY DUE
𝒓 𝒏𝒕
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏 +
𝒓 𝒏
𝒏
Where
FV = Future Value
P = Periodic Payment
r = annual rate
n = no. of conversion periods in a year
t = no. of years
 GENERAL MATHEMATICS
SIMPLE ANNUITY DUE
𝒓 −𝒏𝒕
𝟏− 𝟏+ 𝒓
𝑷𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒏
Where
PV = Present Value
P = Periodic Payment
r = annual rate
n = no. of conversion periods in a year
t = no. of years
 GENERAL MATHEMATICS
EXAMPLES
Suppose Mr. and Mrs. Mariano deposited Php 20,000 at the beginning of
each year for 5 years in an investment that earns 10% per year
compounded annually, what is the amount or future value of the
annuity?
𝒓 𝒏𝒕 SIMPLE ANNUITY DUE
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒏
𝟎. 𝟏𝟎 (𝟏)(𝟓)
𝟏+ −𝟏 𝟎. 𝟏𝟎
𝟏
𝑭𝑽 = 𝟐𝟎𝟎𝟎𝟎 ∙ ∙ 𝟏+ = 𝟏𝟑𝟒 𝟑𝟏𝟐. 𝟐
𝟎. 𝟏𝟎 𝟏
𝟏
After 5 years, the investment will become Php 134,312.20.
 GENERAL MATHEMATICS
EXAMPLES
Hope borrows money for the renovation of her house and repays by
making yearly payments of Php 50,000 at the beginning of each year for
a period of 10 years at an interest rate of 8% compounded annually.
How much did Hope borrow?
𝒓 −𝒏𝒕 SIMPLE ANNUITY DUE
𝟏− 𝟏+ 𝒓
𝑷𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒏
−(𝟏)(𝟏𝟎)
𝟎. 𝟎𝟖
𝟏− 𝟏+ 𝟎. 𝟎𝟖
𝟏
= 𝟓𝟎𝟎𝟎𝟎 ∙ ∙ 𝟏+ = 𝟑𝟔𝟐 𝟑𝟒𝟒. 𝟑𝟗𝟓𝟓
𝟎. 𝟎𝟖 𝟏
𝟏
Hope borrowed an approximate amount of Php 362,344.40.
 GENERAL MATHEMATICS
MORE EXERCISES
1. Alex and Tony are twins. After graduation and being finally able to get
a good job, they plan for retirement as follows:
• Starting at age 24, Alex deposits Php10,000 at the end of each year
for 36 years.
• Starting at age 42, Tony deposits Php20,000 at the end of each year
for 18 years.
Who will have the greater amount at retirement if both annuities earn
12% per year compounded annually?
 GENERAL MATHEMATICS
MORE EXERCISES
1. Alex and Tony are twins. After graduation and being finally able to get
a good job, they plan for retirement as follows:
• Starting at age 24, Alex deposits Php10,000 at the end of each year
for 36 years. Php 4,844,631.16.
• Starting at age 42, Tony deposits Php20,000 at the end of each year
for 18 years. Php 1,114,994.30
Who will have the greater amount at retirement if both annuities earn
12% per year compounded annually? Alex would have the greater amount
at retirement.
𝒓 𝒏𝒕
𝟏+ −𝟏
𝑭𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
 GENERAL MATHEMATICS
MORE EXERCISES
2. Consider the given annuities:
Annuity A: Php 1 000 deposited at the beginning of each month for 3
years at 12% compounded monthly Php 43,507.65
Annuity B: Php 3 000 deposited at the beginning of each quarter for 3
years at 12% compounded quarterly Php 43,853.37
Calculate the amount of each annuity. Compare the two annuities

𝒓 𝒏𝒕
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒏
 GENERAL MATHEMATICS
EXAMPLES
Aaron’s mother saved Php 5,000 at the end of every 6 months in an
education plan that earns 6% per year compounded semi-annually.
What is the amount at the end of 18 years?

𝒓 𝒏𝒕 SIMPLE ORDINARY ANNUITY

𝟏+ −𝟏
𝑭𝑽 = 𝑷 ∙ 𝒏
𝒓
𝒏
𝟎. 𝟎𝟔 (𝟐)(𝟏𝟖)
𝟏+ −𝟏
𝟐
𝑭𝑽 = 𝟓𝟎𝟎𝟎 ∙ = 𝟑𝟏𝟔 𝟑𝟕𝟗. 𝟕𝟐𝟏𝟑
𝟎. 𝟎𝟔
𝟐
At the end of 18 years, the amount will become Php 316,379.72.
 GENERAL MATHEMATICS
EXAMPLES
Cherry borrows money to buy a motorcycle. She will repay the loan by
making monthly payments of Php1,500 at the end of each month for the
next 24 months of the interest rate of 9% per year compounded
monthly. How much did Cherry borrow?
SIMPLE ORDINARY ANNUITY
𝒓 −𝒏𝒕 𝟎. 𝟎𝟗 −(𝟏𝟐)(𝟐)
𝟏− 𝟏+ 𝟏− 𝟏+
𝑷𝑽 = 𝑷 ∙ 𝒏 𝟏𝟐
𝒓 = 𝟏𝟓𝟎𝟎 ∙
𝟎. 𝟎𝟗
𝒏 𝟏𝟐
= 𝟑𝟐 𝟖𝟑𝟑. 𝟕𝟏𝟗𝟐𝟏

She borrowed an approximate amount of Php 32,833.72.

 GENERAL MATHEMATICS
EXAMPLES
Romano has saved for his college education by investing Php12,000 at
the beginning of each year in an education plan that earns 6% per year
compounded annually. What is the total amount of investment at the
end of 16 years?
𝒓 𝒏𝒕 SIMPLE ANNUITY DUE
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒏
𝟎. 𝟎𝟔 (𝟏)(𝟏𝟔)
𝟏+ −𝟏 𝟎. 𝟎𝟔
𝟏
𝑭𝑽 = 𝟏𝟐𝟎𝟎𝟎 ∙ ∙ 𝟏+ = 𝟑𝟐𝟔 𝟓𝟓𝟒. 𝟓𝟓𝟕𝟐
𝟎. 𝟎𝟔 𝟏
𝟏
After 16 years, the investment will become Php 326,554.56.
 GENERAL MATHEMATICS

SYNTHESIS

What do you think should be the

qualities of a investor or a
loaner? Why?