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OrdinaryAnnuity Part2

The document discusses formulas and examples for calculating amounts, present values, and periodic payments for ordinary annuities. It provides formulas for calculating the sum S, present value A, and periodic payment R of an ordinary annuity given the interest rate i and number of periods n. It then works through several examples of using these formulas to solve problems related to ordinary annuities, such as calculating payment amounts, interest rates, and number of periods.

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Kim T
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
25 views

OrdinaryAnnuity Part2

The document discusses formulas and examples for calculating amounts, present values, and periodic payments for ordinary annuities. It provides formulas for calculating the sum S, present value A, and periodic payment R of an ordinary annuity given the interest rate i and number of periods n. It then works through several examples of using these formulas to solve problems related to ordinary annuities, such as calculating payment amounts, interest rates, and number of periods.

Uploaded by

Kim T
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Ordinary Annuity

Ordinary Annuity
Formulas for the amount S, present value A
and periodic payment R of an ordinary
annuity:

 (1 i) 1
n
1 (1 i)  n
S  R  A  R 
 i   i 

Ordinary Annuity
A newly-formed business bought a property
worth Php14.5M. They paid a downpayment
of Php3M with an agreement to pay the
balance in 10 years at 12% compounded
quarterly. How much is the quarterly
payment?
Ai (11,500,000)(.03)
R n  40
1(1i) 11.03
Php497,517.35

  Ordinary Annuity
Jim and his partners want to have Php4.2M in 3
years. They make semi-annual deposits in an
account which pays interest at 7%
compounded semi-annually. Find their semi-
annual deposit.

Si (4,200,000)(.035)
R 
(1i) 1
n
1.035 1
6

Php641,206.48

 
Ordinary Annuity

Finding the interest rate in an ordinary annuity

Ordinary Annuity
At what nominal rate compounded monthly is
P32,000 the present value of an annuity of
P2,000 paid at the end of each moth for 1.5
years?

i1  0.0127008455 5
i2  0.3656420220 2
j  i1m  15.24%
Ordinary Annuity
At what nominal rate compounded annually will
equal deposits of P5,000 at the end of each
year accumulate to P100,00 in 13 years?

i1  0.35891754808
i2  0.06965388049
Si1  736,802.56
Si2  100,477.59
j  i2m  6.97%

Ordinary Annuity
Finding the term of an ordinary annuity

Ordinary Annuity
A P62,000 debt bears interest at 8%
compounded annually. It is to be repaid by
P10,000 at the end of each year for as long as
necessary. How many annual payments of
P10,000 must the debtor make?

This means that 8 annual payments of


P10,000 will not be enough, but 9 annual
n  8.9029332347
4 payments of P10,000 will be more than
enough.
Thus, the debtor must make 8 annual
payments of P10,000 and a final payment
that is less than P10,000.
Ordinary Annuity
A P62,000 debt bears interest at 8%
compounded annually. It is to be repaid by
P10,000 at the end of each year for as long as
necessary. How much is the final payment if it
is to be made 1 year after the last P10,000
payment to completely pay off the debt?

Ordinary Annuity
A P62,000 debt bears interest at 8%
compounded annually. It is to be repaid by
P10,000 at the end of each year for as long as
necessary. How much is the final payment if it
is to be made on the same day as the last
P10,000 payment?

Ordinary Annuity
A fund of P80,000 is to be accumulated by means of
deposits of P3,200 at the end of each 3 months for
as long as necessary. The fund earns 9%
compounded quarterly.
(a) How many quarterly deposits of P3,200 are
needed?
(b) How much is the final deposit if it is to be made on
the same day as the last P3,200 deposit in order to
have exactly P80,000 in the fund on that date?
(c) How much is the final deposit if it is to be made 3
months after the last P3,200 deposit in order to
have exactly P80,000 in the fund on that date?

Ordinary Annuity

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