WEEK 1

• Simple interest- calculated by multiplying the interest rate by the principal amount and the time.
• Principal – amount of money borrowed or invested on the origin date.
• Rate – percentage charged by the lender, or rate increase of the investment.
• Interest – amount paid or earned for the use of money.
• Maturity Value or Future Value – sum of the principal and the interest that accumulates over the
agreed term.
• Time or Term – form of years, days, or months which the money is borrowed or invested, length
of time between the origin and maturity dates.
• Ordinary Time/Banker’s Rule (Approximate Time) – assumes that each of the 12 months in a
year
has 30 days for a total of 360 days
• Exact Time (Actual Time) – exact number of inclusive days of transaction 365 days, thus:
t = (number of days)/360 or t = (number of days)/365.

(FORMULA)

Interest (I) P× 𝑅 × 𝑇

Principal (P) 𝐼
𝑅𝑇

Rate (r) 𝐼
𝑃𝑇
× 100

Time (t) 𝐼
𝑃𝑅

P 𝐹
1+𝑅𝑇

Maturity Value (MV) P+I or P(1+rt)

WEEK 2

• Compound interest – interest is computed on the principal and on the accumulated past interest.

Compounding/Conversion Frequency No. of Conversions Per Year (m)

Annually 1

Semiannually 2
 Quarterly 4

Bimonthly 6

Monthly 12

Daily 365 or 360

(FORMULA)

Maturity or Future Value (F) P (1 + i)

𝑛 𝑟
or P (1 + 𝑚 )
𝑚𝑡

Rate (r) 𝑛 𝐹 𝑀𝑇 𝐹
m( 𝑃
- 1) x 100 or m 𝑃
- 1 x 100

Present Value (P) 𝐹 −𝑛

𝑛 or F (1 + i)
(1 + 𝑖)

Compound Interest (lc) F-P

Interest rate per compounding period (i) 𝑟

𝑚

Time (t) 𝑙𝑜𝑔 𝑃

𝐹

𝑚[𝑙𝑜𝑔(1+𝑖)]

Total number of conversion periods (n) mt

P – Present Value
r – Nominal interest rate (should always be expressed in decimal form)
m – Number of conversions per year
j - Rate per conversion period
n -Total number of conversion periods
t – Time or term of loan or investment
IC – Compound interest
F – Maturity or future value
i = interest rate per compounding period

WEEK 3

● ANNUITY – sequence of payments made at equal (fixed) intervals or periods of time.

● PAYMENT INTERVAL – length of time between successive payments.
● TERM OF AN ANNUITY – total time between the first payment interval and last payment interval.
● REGULAR OR PERIODIC PAYMENT (R) – amount of each payment.
● AMOUNT OF AN ANNUITY/ FUTURE VALUE (F) – sum of the Future Values (compound
amounts) of all the payments to be made during the entire term of the annuity.
● PRESENT VALUE OF AN ANNUITY (P) – sum of the Present Values of all the payments (lump
sum) to be made during the entire term of the Annuity.
● CASH FLOW – net amount of cash and cash equivalents being transferred in and out of a company
● FUTURE VALUE OF ANNUITY - total value of a series of recurring payments at a specified date
in the future.
● FAIR MARKET VALUE OR ECONOMIC VALUE - cash flow stream on a particular date refers
to a single amount that is a fair market substitute for the cash flow stream

CLASSIFICATION OF ANNUITIES

A. According to Payment Interval and Interest Period

1. SIMPLE ANNUITY – an annuity where the payment interval is the same as the interest period
2. GENERAL ANNUITY – an annuity where the payment interval is not the same as the interest
period

B. According to Payment Schedule

1. Ordinary Annuity – a type of annuity in which the payments are made at the end of each
payment interval
Examples:
● installment basis of paying a car, appliance, house and lot
● tuition fee
● salaries
● stock dividends

2. Annuity Due – a type of annuity in which the payments are made at the beginning of each
payment interval
Examples:
● rent
● educational insurance plan

C. According to Duration (Term)

1. Annuity Certain – an annuity in which payments begin and end at definite times (specific
number of time periods).
Examples:
● Mortgage payment of house
● Salary
● Installment plans

2. Contingent Annuity – an annuity in which the payments extend over an indefinite

(indeterminate) length of time.
Examples:
● Life insurance that ceases when the person insured dies.
● Pension payments

Steps in Solving Problems Involving Simple Annuity:

1. Determining the variables:
a. Determine the value of the initial deposit or payment (R).
b. Determine n, the number of deposits by multiplying the time (t) of the loan or investment by
the number of conversions per year (m).
c. Determine i by dividing the annual interest rate (j) by the number of times per year that
interest is compounded (m).

2. Substituting the given to the formula

a. Substitute values for R, i, and n into the formula.

3. Computing Sn and An
a. Simplify to find the Sn and An, the value of the annuity after n deposits.

(NOTE DO NOT ROUND THE NUMBERS OFF IF IT IS NOT YET THE FINAL ANSWER)

(FORMULA)

Future Value of Simple Annuity (Sn) 𝑛

(1+𝑖) − 1
R[ 𝑖
]

Present Value of Simple Annuity (An) 1− (1+𝑖)

−𝑛
𝑅[ 𝑖
]

Fair Market Value of a Cash Flow Stream P = F(1 + i)

−𝑛

WEEK 4

• DEFERRED ANNUITY – annuity that does not begin until a given time interval has passed. It is a
kind of annuity which payments (or deposits) starts in more than one period from the present amd can
be a long-term investment in which you invest a sum of money
• PERIOD OF DEFERRAL – time between the purchase of an annuity and the start of the payments
for the deferred annuity

(FORMULA)

Future Value of General Annuity (Snc) (1+𝑓) −1

𝑛
R[ 𝑓
]

Present Value of General Annuity (Anc) 1− (1+𝑓)

−𝑛
R[ 𝑓
]

number of payments in the annuity (n) tk

 number of conversion periods per payment 𝑚
interval (c) 𝑘

effective interest rate per payment interval (f) 𝑐

(1+i) -1

j = nominal interest rate

m = number of conversions per year
t = time/period (term) of the loan or investment
k = number of
payments per year
n = number of payments in the annuity
R = size of each annuity payment (periodic payment)
i = interest rate per conversion/ compounding period
f = effective interest rate per payment interval
c = number of conversion periods per payment interval
Snc = Future Value of an n- payment ordinary general annuity
Anc = Present Value of an n- payment ordinary general annuity

Present Value of a Deferred Annuity 1− (1+𝑗)

−(𝑘+𝑛)
1− (1+𝑗)
−𝑘
R[ 𝑗
]-R[ 𝑗
]

R = Present Payment
j = Interest rate per period
n = number of actual payments
k = number of conversation periods in the deferral or number

WEEK 5

● Stocks - share in the ownership of a company

● Stockholder- someone who has shares in a company.
● Dividend- the amount of stockholders’ shares of the company’s earning or profit.
● Bonds- are loans provided to an organization like the government.
● Bondholder- a holder of bonds issued by a government or corporation.
● Par Value or Face Value – is the principal borrowed as shown in the bond
● Preferred stockholders - receive dividends first
● Common stock - shareholders are last in line when it comes to company assets

(FORMULA)

Par Value (P) 𝑆𝑜

𝑆𝑇
 dividend per share (n) 𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠

total amount of dividend (n) n = Par Value x Dividend Rate x Number of Share

Periodic Interest (I) 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠

Par Value x Rate x 12 𝑚𝑜𝑛𝑡ℎ𝑠

Current Yield (Y) 𝑎𝑛𝑛𝑢𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡

𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑑 𝑝𝑟𝑖𝑐𝑒

P- part of the stockholder’s ownership of the company

So - number of shares which the stockholder owns.
ST- total number of shares issued by company.
WEEK 6

● Proposition – is a declarative sentence that is either true or false; it must be one or the other, or it
cannot be both.
● Compound proposition - proposition formed from simpler proposition using logical connectors or
some combination of logical connectors.
● Conditional statements - statements where a hypothesis is followed by a conclusion
● Tautology – compound statement which is true for every value of individual statements. A
statement which is true and cannot be false.
● Fallacy- the opposite of tautology is contradiction or fallacy. A compound statement which is false
and cannot be true. It is the use of invalid or otherwise faulty reasoning.
● Contingency- a compound proposition which has both some true and some false values for every
value of its propositional variables.
● Propositional logic- also known as sentential logic, is that branch of logic that studies ways of
combining or altering statements or propositions to form more complicated statements or propositions.
Involves studying logical connectives such as the words “and” and “or”.
● Negation -simple propositions are usually negated by either the insertion or deletion of the word
“not.” The symbol ∼ denotes not. Given a statement p, the sentence ∼ p is read not p and is defined
through its truth table
● Conjunction - is a compound proposition which consists of two propositions joined by the
connective “and”. The propositions p and q is denoted by p ∧ q and is defined through its truth table
● Disjunction - is a compound proposition which consists of 2 propositions joined by the connective
“or.” The propositions p or q is denoted by p ∨ q and is defined through its truth table
● Conditional proposition - is a compound proposition which consists of 2 propositions joined by
the connective “If ...then ...”
● Biconditional proposition - compound proposition which consists of 2 propositions joined by the
connective phrase “if and only if.”
● Syllogism - Based on “DEDUCTIVE REASONING”

TWO TYPES OF ARGUMENT

● Argument- Consist of two or more proposition offered as evidence for another proposition
● Inductive (specific to general) - state that if the premises are true, then it is probable that conclusion
be true hence even if all premises are true, inductive argument or reasoning allows the conclusion to be
false.
● Deductive (general to specifics)- state that if the premises are true, then the conclusion is necessarily
true. Begins with a general statements or hypothesis and then examines the possibilities to reach a
specifics logical conclusion

SYLLOGISM
● MAJOR PREMISE= Premise that contains the major term
● MINOR PREMISE= Premise that contains the minor term
● CONCLUSION= Third proposition whose meaning and truth are implied in the premises.
● MAJOR TERM= Predicate of the conclusion
● MINOR TERM= Subject of the conclusion
● REMAINING TERM= Remaining term which does not (and cannot) appear in the conclusion.

8 RULES OF SYLLOGISM

Rule #1: Only three terms may appear in the syllogism

Rule #2: Neither the major nor minor term may be a universal in the conclusion, if it was only a
particular term in the premises.
Rule #3: The middle term may not appear in the conclusion.
Rule #4: The middle term must be distributed at least
Rule #5: If both premises are affirmative, the conclusion must also be affirmative.
Rule #6: Both premises may not be negative; one at least must be affirmative.
Rule #7: If either premise is negative, the conclusion must be negative; if one of the premises is a
particular proposition, the conclusion must be a particular proposition.
Rules #8: No conclusion can be drawn from two particular premises; one at least must be a
universal proposition.

WEEK 1 EXAMPLE PROBLEM WITH SOLUTION

(SIMPLE INTEREST)
WEEK 2 EXAMPLE PROBLEM WITH SOLUTION
(COMPOUND INTEREST)
WEEK 3 EXAMPLE PROBLEM WITH SOLUTION
(GENERAL ANNUITY)

WEEK 5 EXAMPLE PROBLEM WITH SOLUTION

(STOCKS AND BONDS)
WEEK 6 EXAMPLE PROBLEM WITH SOLUTION
(TAUTOLOGY, FALLACY AND CONTINGENCY)
 GOODLUCK !!!!!

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