Professional Documents
Culture Documents
Annuity
is a series/sequence of
payments (usually equal) made at equal
intervals of time.
Installment payments
Monthly payments/rentals
Insurance premiums
Monthly retirement benefits
Weekly / monthly wages
Types of Annuity
1. Annuity Certain
Annuity payable for a definite duration
Payments begin and end at fixed times
2. Contingent Annuity or
Annuity Uncertain
Annuity payable for an indefinite
duration (beginning or termination is
dependent on some certain event)
Payments are not certain to be made
Annuity
The interest conversion
period () is equal to the
payment interval ()
General Annuity
The interest conversion
period () is not equal to
the payment interval ()
Classification of Simple
Annuity
Ordinary
Annuity
Annuity Due ()
Annuity in which periodic payment () is made at
the beginning of each payment interval
Deferred Annuity ()
Annuity in which periodic payment () is neither at
the beginning nor end of each payment interval
but some later date.
ORDINARY ANNUITY
FORMULAS
Finding F when given A
given F
(1 i ) n 1
F A
P A
i (1 i )
Finding A when
i
A F
n
(1 i ) 1
Finding A when
n
i (1 i )
A P
n
(1 i ) 1
Source: Sullivan, William G., Elin M. Wicks and James T. Luxhoj. (2006). ENGINEERING ECONOMY,
13TH ED. Pearson-Prentice Hall. p104-130
FORMULAS
Finding F when given A
given F
(1 i ) n 1
F A
P A
i (1 i )
Finding A when
i
Uniform
ASeries
F
n
(
1
i
)
Compound
amount
factor
Finding A when
n
i (1 i )
A P
n
(1 i ) 1
Source: Sullivan, William G., Elin M. Wicks and James T. Luxhoj. (2006). ENGINEERING ECONOMY,
13TH ED. Pearson-Prentice Hall. p104-130
FORMULAS
Finding F when given A
given F
Finding A when
Finding A when
n
(1 i ) n 1
F A
P A
i (1 i )
i
A F
Sinking
n
fund factor (1 i ) 1
i (1 i )
A P
n
(1 i ) 1
Source: Sullivan, William G., Elin M. Wicks and James T. Luxhoj. (2006). ENGINEERING ECONOMY,
13TH ED. Pearson-Prentice Hall. p104-130
(1 i ) n 1
F A
Finding A when
i
A F
n
(1 i ) 1
Uniform i (1 i )
given P(1 i ) 1
A
P
P A
series
n
n
present (1 i ) 1
i (1 i )
factor
Source: Sullivan, William G., Elin M. Wicks andworth
James T. Luxhoj.
(2006). ENGINEERING ECONOMY,
13TH ED. Pearson-Prentice Hall. p104-130
FORMULAS
Finding F when given A
given F
(1 i ) n 1
F A
Finding A when
i
A F
n
(1 i ) 1
P
P A
n
n recovery
(1 i ) 1
i (1 i ) factor
Source: Sullivan, William G., Elin M. Wicks and James T. Luxhoj. (2006). ENGINEERING ECONOMY,
13TH ED. Pearson-Prentice Hall. p104-130
SEATWORK
SEATWORK
1. A man deposits P12,200
every end of 6 months in
an account paying 5 %
compounded semiannually. What amount is
in the account at the end of
9 years and 6 months?
Finding the
INTEREST RATE
of an Annuity
where
a
b
c
c
*Type
1: use the minus sign of the quadratic formula
*Type 2: use the plus sign of the quadratic formula
At
what
nominal
rate
compounded quarterly is
the loan of P48,000 be paid
with equal payment of
P2,400 at the end of each 3
months for 6 years?
of
3.8
million
at
9%
Find the time and the number of semiannual payments of P480 each and the
concluding deposit, which must be made
to accumulate P18,500, if money earns
interest
annually.
at
7%
compounded
semi-
(1 i )
F A
i
n 1
1 (1 i )
P A
i
n 1