Scribd
Upload
34 views

Simple Annuity

This document defines and provides examples of simple annuities. It explains that a simple annuity is one where the payment interval is the same as the interest period. It also defines key terms related to annuities such as periodic payment, term, amount or future value, and present value. An example is provided to illustrate how to calculate the future value of a simple annuity over 6 months with monthly payments of P3,000 and an interest rate of 9% compounded monthly.

Uploaded by

Aizilyn Capillanes
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
34 views

Simple Annuity

This document defines and provides examples of simple annuities. It explains that a simple annuity is one where the payment interval is the same as the interest period. It also defines key terms related to annuities such as periodic payment, term, amount or future value, and present value. An example is provided to illustrate how to calculate the future value of a simple annuity over 6 months with monthly payments of P3,000 and an interest rate of 9% compounded monthly.

Uploaded by

Aizilyn Capillanes
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 15

SIMPLE ANNUITY

Prepared By : Aizilyn Capillanes & Steven Legaspi


Grade 11 ABM
Mrs. Roumelia Domion
ANNUITY– a sequence of payments made at
equal(fixed) intervals or periods of time.

Annuities may be classified in different ways, as


follows.
ANNUITIES
According to payment Simple Annuity- an annuity General Annuity - an
interval and interest period where the payment annuity where the
interval is the same as the payment interval is not the
interest period same as the interest period

According to time of Ordinary Annuity (or Annuity Annuity Due – a type of


payment Immediate) – a type of annuity in which the
annuity in which the payments are made at
payments are made at the beginning of each payment
end of each payment interval
interval

According to duration Annuity Certain– an annuity Contingent Annuity – an


in which payments begin annuity in which the
and end at definite times payments extend over an
indefinite (or indeterminate)
length of time
Term of an annuity, t – time between the first payment
interval and last payment interval

Regular or Periodic payment, R – the amount of each


payment

Amount (Future Value) of an annuity, F – sum of future


values of all the payments to be made during the entire
term of the annuity.

Present value of an annuity, P – sum of present values


of all the payments to be made during the entire term
of the annuity
TIME DIAGRAM

Time Diagram for an n-Payment Ordinary Annuity

R R R R R … R

0 1 2 3 4 5 n
Example 1
Suppose Mrs. Remoto would like to save
P3,000 every month in a fund that gives 9%
compounded monthly. How much is the
amount or future value of her savings after
6 months? Given: periodic payment R =
P3,000 term t = 6 months interest rate per
annum i(12) = 0.09 number of conversions
per year m = 12 interest rate per period j =
12 .0 09 = 0.0075 Find: amount (future
value) at the end of the term, F
Add all the future values obtained from the
previous step.

Thus, the amount of this annuity is P18,340.89

You might also like