GENERAL MATHEMATICS

MATHEMATICS of
INVESTMENT
Amortization and Deferred Annuity
SECOND QUARTER
Week 3 Lesson 3
 GENERAL MATHEMATICS
LEARNING TARGETS
I can:
❑ compute for the periodic payment of a simple
annuity.
❑ create an amortization schedule.
 GENERAL MATHEMATICS
RECALL CONCEPTS
❑ PERIODIC PAYMENT – each payment in an annuity
❑ PAYMENT INTERVAL – time between the successive
payment dates of an annuity
❑ TERM OF ANNUITY – the interval between the
beginning of the first payment period and the end
of the last payment period
 GENERAL MATHEMATICS
RECALL 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
SOLVING FOR THE PERIODIC PAYMENT 𝒓 𝒏𝒕
𝟏+ −𝟏
𝒓 𝒏𝒕 𝑭𝑽 ÷ 𝒏 =𝑷
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 𝒏
𝒓
𝒓 𝒏𝒕 𝒏 𝒓
𝟏+ −𝟏 𝒏
𝒏 𝒓 𝒏𝒕 𝑭𝑽 × =𝑷
𝒓 𝟏+ −𝟏 𝒓 𝒏𝒕
𝒏 𝟏+ −𝟏
𝒏 𝒓 𝒏
𝒏 𝒓
Where 𝑭𝑽 ×
FV = Future Value
𝑷= 𝒏
P = Periodic Payment
r = annual rate 𝒓 𝒏𝒕
𝟏+ −𝟏
n = no. of conversion periods in a year
t = no. of years
𝒏
 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
SIMPLE ORDINARY ANNUITY
SOLVING FOR THE PERIODIC PAYMENT 𝒓 −𝒏𝒕
−𝒏𝒕 𝟏− 𝟏+
𝒓 𝑷𝑽 ÷ 𝒏 =𝑷
𝟏− 𝟏+ 𝒓
𝑷𝑽 = 𝑷 ∙ 𝒏
𝒓 𝒏
𝒓 −𝒏𝒕 𝒏
𝟏− 𝟏+ 𝒓
𝒏 𝒓 −𝒏𝒕 𝒏
𝒓 𝟏− 𝟏+ 𝑷𝑽 × −𝒏𝒕 =𝑷
𝒏 𝒓
𝒏 𝒓 𝟏− 𝟏+
𝒏
𝒏 𝒓
Where
𝑷𝑽 ×
PV = Present Value
𝑷= 𝒏
P = Periodic Payment −𝒏𝒕
r = annual rate 𝒓
n = no. of conversion periods in a year 𝟏− 𝟏+
t = no. of years
𝒏
 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
SOLVING FOR THE PERIODIC PAYMENT
𝒓 𝒏𝒕
𝟏+ −𝟏 𝒓
𝑭𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒓 𝒏𝒕 𝒏 Where
𝟏+ −𝟏 𝒓
𝒏 ∙ 𝟏+ FV = Future Value
𝒓 𝒏 𝒓 𝒏𝒕 P = Periodic Payment
𝒏 𝟏+ −𝟏 𝒓
𝒏
∙ 𝟏+ r = annual rate
𝒓
𝒏
𝒏 n = no. of conversion
periods in a year
𝒏𝒕 t = no. of years
𝒓 𝒓
𝟏+ −𝟏 ∙ 𝟏+ 𝒓
𝒏 𝒏
𝑭𝑽 ÷ =𝑷 𝑭𝑽 ×
𝒓 𝑷= 𝒏
𝒏 𝒓 𝒏𝒕 𝒓
𝟏+ −𝟏 ∙ 𝟏+
𝒏 𝒏
 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
SIMPLE ANNUITY DUE
SOLVING FOR THE PERIODIC PAYMENT
𝒓 −𝒏𝒕
𝟏− 𝟏+ 𝒓
𝑷𝑽 = 𝑷 ∙ 𝒏 ∙ 𝟏+
𝒓 𝒏
𝒓 −𝒏𝒕 𝒏 Where
𝟏− 𝟏+ 𝒓
𝒏 ∙ 𝟏+ PV = Present Value
𝒓 𝒏 𝒓 −𝒏𝒕 P = Periodic Payment
𝒏 𝟏− 𝟏+ 𝒓
𝒏
∙ 𝟏+ r = annual rate
𝒓
𝒏
𝒏 n = no. of conversion
periods in a year
𝒓 −𝒏𝒕 𝒓 t = no. of years
𝟏− 𝟏+𝒏 ∙ 𝟏+𝒏
𝑷𝑽 ÷ =𝑷 𝒓
𝒓 𝑷𝑽 ×
𝑷= 𝒏
𝒏
𝒓 −𝒏𝒕 𝒓
𝟏− 𝟏+ ∙ 𝟏+
𝒏 𝒏
 GENERAL MATHEMATICS
EXAMPLES
1. Mary borrows Php 500, 000 to buy a car. She has two options to repay her
loan. The interest is compounded monthly. Find Mary’s monthly payment
under each option:
Option 1: 24 monthly payments every beginning of the month at 12% per
year compounded monthly.
𝒓
𝑷𝑽 ×
SIMPLE ANNUITY DUE 𝑷= 𝒏
𝒓 −𝒏𝒕 𝒓
𝟏− 𝟏+ ∙ 𝟏+
𝒏 𝒏
Option 2: 60 monthly payments every end of the month at 15% per year
compounded monthly. 𝒓
𝑷𝑽 ×
𝒏
SIMPLE ORDINARY ANNUITY 𝑷=
𝒓 −𝒏𝒕
𝟏− 𝟏+
𝒏
 GENERAL MATHEMATICS
EXAMPLES
1. Mary borrows Php 500, 000 to buy a car. She has two options to repay her
loan. The interest is compounded monthly. Find Mary’s monthly payment
under each option:
Option 1: 24 monthly payments every beginning of the month at 12% per
year compounded monthly.
𝟎. 𝟏𝟐
𝟓𝟎𝟎 𝟎𝟎𝟎 ×
𝑷= 𝟏𝟐
−(𝟐𝟒) ≈ 𝟐𝟑 𝟑𝟎𝟑. 𝟕𝟎
𝟎. 𝟏𝟐 𝟎. 𝟏𝟐
𝟏− 𝟏+ ∙ 𝟏+
𝟎. 𝟏𝟐 𝟏𝟐
Option 2: 60 monthly payments every end of the month at 15% per year
compounded monthly.
𝟎. 𝟏𝟓 For Option 1, the monthly
𝟓𝟎𝟎 𝟎𝟎𝟎 ×
𝟏𝟐 payment is Php 23,303.70,
𝑷= −𝟔𝟎
≈ 𝟏𝟏 𝟖𝟗𝟒. 𝟗𝟕 while for Option 2, the monthly
𝟎. 𝟏𝟓
𝟏− 𝟏+
𝟏𝟐 payment is Php 11,894.97.
 GENERAL MATHEMATICS
EXAMPLES
2. A fund is to be established to accumulate Php 150 000 at the
end of 5 years and 6 months. If deposits are to be made at the
end of every three months and interest is 8% compounded
quarterly, how much should each deposit be?
SIMPLE ORDINARY ANNUITY
𝒓 𝟎. 𝟎𝟖
𝑭𝑽 × 𝟏𝟓𝟎 𝟎𝟎𝟎 ×
𝑷= 𝒏 𝟒
𝒏𝒕 = ≈ 𝟓 𝟒𝟗𝟒. 𝟕𝟏𝟎𝟎𝟎𝟕𝟗
𝒓 𝟎. 𝟎𝟖 (𝟒)(𝟓.𝟓)
𝟏+ −𝟏 𝟏+ −𝟏
𝒏 𝟒

Each deposit must be Php 5,494.71.

 GENERAL MATHEMATICS
EXAMPLES
3. A newly wed couple is planning to go for a vacation 8 months
from now. To materialize this vacation, they plan to deposit a
certain amount at the beginning of each month in a saving’s
account that pays 9% interest rate compounded monthly. How
much should each deposit be to accumulate the needed
amount of Php 6,000?
SIMPLE ANNUITY DUE
𝒓 𝟎. 𝟎𝟗
𝑭𝑽 × 𝟔𝟎𝟎𝟎 ×
𝑷= 𝒏 𝑷= 𝟏𝟐
𝒓 𝒏𝒕 𝒓
𝟏+ −𝟏 ∙ 𝟏+ 𝟎. 𝟎𝟗 (𝟖) 𝟎. 𝟎𝟗
𝒏 𝒏 𝟏+ −𝟏 ∙ 𝟏+
𝟏𝟐 𝟏𝟐

Each deposit must be Php 725.09. ≈ 𝟕𝟐𝟓. 𝟎𝟗𝟒𝟗𝟑𝟐𝟔

 GENERAL MATHEMATICS
EXAMPLES
4. Eva obtained a loan of Php 50,000 for the tuition fee of her son. She has to
repay the loan by equal payments at the end of every six months for 3
years at 10% interest compounded semi-annually. Find the periodic
payment.
SIMPLE ORDINARY ANNUITY
𝒓 𝟎. 𝟏𝟎
𝑷𝑽 × 𝟓𝟎 𝟎𝟎𝟎 ×
𝒏 = 𝟐 ≈ 𝟗 𝟖𝟓𝟎. 𝟖𝟕𝟑𝟒𝟎𝟔
𝑷= −(𝟐)(𝟑)
𝒓 −𝒏𝒕 𝟎. 𝟏𝟎
𝟏− 𝟏+ 𝟏− 𝟏+ −𝟏
𝒏 𝟐

The periodic payment is

Php 9,850.87.
 GENERAL MATHEMATICS
CONCEPTS
AMORTIZATION
- The gradual extinction of a loan over a period of time by
means of a sequence of regular or equal payments as to
principal and interest due at the end of equal intervals of time

- The process of paying a loan and its interest

through series of regular equal payments.

[ amortized loan ]
- A loan paid using this scheme
 GENERAL MATHEMATICS
CONCEPTS
AMORTIZATION SCHEDULE
1 2 3 4 5

No. of Periodic Interest Amount Outstanding

periods Payment Repaid Balance
[𝒏×𝒕] I = Previous balance ×
periodic rate
Periodic payment
minus Interest in the
previous column Balance minus
𝒓 amount in 4th column
*periodic rate
𝒏
is [P−I]
ratio of the interest rate
and the conversion
period
 GENERAL MATHEMATICS
EXAMPLES
1. Eva obtained a loan of Php 50,000 for the tuition fee of her son. She has to
repay the loan by equal payments at the end of every six months for 3
years at 10% interest compounded semi-annually. Construct an
amortization schedule.
SIMPLE ORDINARY ANNUITY
P = Php 9,850.87
First column: No. of Payments/Periods
PV = Php 50,000
r = 0.10
Third column: Interest
t = 3 years
n=2
 GENERAL MATHEMATICS
CONCEPTS
Basic MS Excel Formulas and Functions
In Excel, a formula is an expression that operates on values in a range of
cells or a cell. Functions are predefined formulas in Excel. They eliminate
laborious manual entry of formulas while giving them human-friendly
names.
FUNCTION: SUM = cell address 1 + cell address 2 + … = SUM(cell address)*
FUNCTION: DIFFERENCE = cell address 1 – cell address 2 – …
FUNCTION: Exponent =cell address^exponent
FUNCTION: Multiply =cell address 1 * cell address 2
FUNCTION: Divide = cell address 1 / cell address 2
 GENERAL MATHEMATICS
CONCEPTS
Basic MS Excel Formulas and Functions
OTHER FUNCTIONS:
DRAG DOWN – Allows you to quickly copy formulas into adjacent cells by
dragging the fill handle.
When you fill formulas down, relative references will be put in place to
ensure the formulas adjust for each row.

ABSOLUTE CELL REFERENCE – Absolute cell reference can be used when a

particular cell reference needs to be constant. The symbol used in
absolute cell reference is the $ sign.
 GENERAL MATHEMATICS
AMORTIZATION SCHEDULE
NO. OF PERIODIC INTEREST OUTSTANDING
PERIODS AMOUNT REPAID
PAYMENT (0.05 OR 5%) BALANCE

0 Php 50 000
1 Php 9 850.87 Php 2 500 Php 7 350.87 Php 42 649.13
2 Php 9 850.87 Php 2 132.46 Php 7 718.41 Php 34 930.72
3 Php 9 850.87 Php 1 746.54 Php 8 104.33 Php 26 826.38
4 Php 9 850.87 Php 1 341.32 Php 8 509.55 Php18 316.83
5 Php 9 850.87 Php 915.84 Php 8 935.03 Php 9 381.80
6 Php 9 850.87 Php 469.09 Php 9 381.78 Php 0.02
 GENERAL MATHEMATICS
EXAMPLES
2. Cleo borrowed Php 20,000 from a bank that charges 4% interest
compounding quarterly. How much will she have to pay at the end of
every 3 months for 2 years to repay her loan?

3. Exponent Corporation is required to pay 8 annual installments of Php

2,500,000 each for a loan to pay for expansion at 12% compounded
annually. How much is the loan? Assuming that the payments are made at
the end of each year, construct the amortization schedule.
 GENERAL MATHEMATICS
EXAMPLES
2. Cleo borrowed Php 20,000 from a bank that charges 4% interest
compounding quarterly. How much will she have to pay at the end of
every 3 months for 2 years to repay her loan? SIMPLE ORDINARY ANNUITY

𝒓 𝟎. 𝟎𝟒
𝑷𝑽 × 𝟐𝟎 𝟎𝟎𝟎 × 𝒏𝒕 = 𝟒 𝟐 = 𝟖
𝑷= 𝒏 = 𝟒
−𝒏𝒕
𝟏− 𝟏+
𝒓 𝟎. 𝟎𝟒 −(𝟒)(𝟐)
𝒏 𝟏− 𝟏+ 𝒓 𝟎. 𝟎𝟒
𝟒 = = 𝟎. 𝟎𝟏
𝒏 𝟒
≈ 𝟐𝟔𝟏𝟑. 𝟖𝟎𝟓𝟖𝟒𝟏
≈ 𝟐𝟔𝟏𝟑. 𝟖𝟏
 GENERAL MATHEMATICS
EXAMPLES PERIODIC AMOUNT OUTSTANDING
PERIOD INTEREST
2. Cleo borrowed Php 20,000 PAYMENT REPAID BALANCE
from a bank that charges
4% interest compounding 0 20,000
quarterly. How much will
she have to pay at the 1 2,613.81 200 2,413.81 17,586.19
end of every 3 months for 2 2,613.81 175.86 2,437.95 15,148.24
2 years to repay her loan?
3 2,613.81 151.48 2,462.33 12,685.91
4 2,613.81 126.86 2,486.95 10,198.96
5 2,613.81 101.99 2,511.82 7,687.14
6 2,613.81 76.87 2,536.94 5,150.20
7 2,613.81 51.50 2,562.31 2,587.90
8 2,613.81 25.88 2,587.93 -0.03
 GENERAL MATHEMATICS
EXAMPLES
3. Exponent Corporation is required to pay 8 annual installments of Php 2,500,000 each for a
loan to pay for expansion at 12% compounded annually. How much is the loan?
Assuming that the payments are made at the end of each year, construct the
amortization schedule. SIMPLE ORDINARY ANNUITY
𝒓 −𝒏𝒕
𝟏− 𝟏+ 𝒏𝒕 = 𝟖
𝑷𝑽 = 𝑷 ∙ 𝒏
𝒓 𝒓 𝟎. 𝟏𝟐
𝒏 = = 𝟎. 𝟏𝟐
𝒏 𝟏
−(𝟏)(𝟖)
𝟎. 𝟏𝟐
𝟏− 𝟏+
𝟏
= 𝟐 𝟓𝟎𝟎 𝟎𝟎𝟎 ∙ ≈ 𝟏𝟐 𝟒𝟏𝟗 𝟎𝟗𝟗. 𝟒𝟐
𝟎. 𝟏𝟐
𝟏
 GENERAL MATHEMATICS
EXAMPLES
3. Exponent Corporation is required to pay 8 annual installments of Php 2,500,000 each for a
loan to pay for expansion at 12% compounded annually. How much is the loan?
Assuming that the payments are made at the end of each year, construct the
amortization schedule.
 GENERAL MATHEMATICS
MORE EXERCISES*
1. Tasha saves Php 2,000 at the end of every month at an
account that earns 5% interest compounding monthly. How
much will she have in her account in 3 years?
2. Mona borrowed from a bank and agreed to pay Php 5,279.11
at the end of every 6 months for 5 years at 2% interest
compounding semi-annually. How much did she originally
borrow?
3. Eve wants to have Php 200,000 in 3 years for a big purchase.
She plans to deposit an amount at the start of every 3 months
at an account that earns 6% interest compounding quarterly.
What is the minimum amount that she should save to achieve
her goal?
 GENERAL MATHEMATICS

WINDSHIELD CHECK
• CLEAR – I get it!
• WITH BUGS – I get it for the most part, but some
things are still unclear.
• MUDDY – I still don’t get it!
 GENERAL MATHEMATICS

SYNTHESIS

What is the importance of an

amortization table?
How can you successfully
construct an amortization table?
 GENERAL MATHEMATICS
ASSIGNMENT
Answer Exercise I on page 7 of Module 2 Lesson 3.
Show your solutions and use Excel to create the
amortization schedule.
 GENERAL MATHEMATICS
ASSIGNMENT
 GENERAL MATHEMATICS
MT 1 Guidelines
1. You will research for the cost of your dream house/car.
2. You must create an application using MS excel that will
help you to construct an amortization schedule for the
payment of your chosen house/car for PLAN A, PLAN B,
PLAN C, and PLAN D.
3. Make a separate sheet for each plan on the Excel file.
4. The rate, duration, and compounding period will be given
in this file.
5. You will submit 2 files: (1) Excel File of the Amortization and
(2) a file that contains the value and description or
specifications of the chosen house/car and the answers to
the following guide questions.
 GENERAL MATHEMATICS
MT 1 Guidelines
Guide Questions:
1. Why did you choose this house/car?
2. As a buyer of the car/house, which plan do you prefer?
Why?
3. How does duration affect the future value of an annuity?
4. How does compounding period affect the future value of
an annuity?
 GENERAL MATHEMATICS
MT 1 Guidelines
 GENERAL MATHEMATICS
MT 1 Rubric