TERMINOLOGIES
The time between the first payment interval and the last payment interval.
Term of an Annuity (t)
a person pays a monthly rent of $500 at the beginning of each month for a year.
Annuity Due
The sum of future value of all the payments to be made during the entire term of the annuity.
Amount (Future Value) of an annuity (F)
A monthly mortgage payment where the payment is made at the end of each month.
Ordinary Annuity
The sum of present value of all the payments to be made during the entire term of the annuity.
Present Value of an annuity (P)
A person buys a life insurance policy that pays a fixed amount to the beneficiary for 20 years, regardless of how long the insured person lives.
Annuity Certain
The amount of each payment.
Regular or Periodic Payment (R
A monthly deposit of $100 into a savings account that earns interest monthly.
Simple Annuity
A smartphone is purchased with a down payment of ₱1,000 and the balance at ₱1,075.83 a month for one year. What is its cash price if the interest rate is 6% converted monthly?
Php 12,499
is equal to the down payment (if there is any) plus the present value of the installment payments
CASH PRICE/CASH VALUE
It is an annuity where the length of the payment interval is not the same as the length of the interest compounding period.
General Annuity
Suppose Mrs. Miranda would like to deposit P3,000 every month in a fund that gives 9%, compounded monthly. How much is the amount of future value of her savings after 6 months?
P18, 340.89