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Lesson 11 - Simple Annuity PDF

1. The document discusses the concept of simple annuity, which refers to a sequence of equal payments made at regular intervals. 2. There are different types of annuities such as ordinary annuity, annuity due, and deferred annuity, which are classified based on when payments begin and end. 3. Formulas are provided for calculating the accumulated amount of ordinary annuities and annuities due using variables like the periodic payment amount, interest rate, and number of periods.

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726 views2 pages

Lesson 11 - Simple Annuity PDF

1. The document discusses the concept of simple annuity, which refers to a sequence of equal payments made at regular intervals. 2. There are different types of annuities such as ordinary annuity, annuity due, and deferred annuity, which are classified based on when payments begin and end. 3. Formulas are provided for calculating the accumulated amount of ordinary annuities and annuities due using variables like the periodic payment amount, interest rate, and number of periods.

Uploaded by

Peter Eclevia
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Mathematics in the Modern World

1
Mathematics of Finance

Module 11 Simple Annuity

At the end of this module, you are expected t0:

1 Understand the concept of simple annuity.


2. Identify different kinds of annuities
3. Solve problems involving annuities.

Annuity
It is a sequence of equal payments made at equal periods. Payments may be done
annually, semi-annually, etc. Some good examples are monthly payments of rent, weekly wages and
annual premiums on life insurance policy.

Annuities are classified according to:


1. Annuity certain- it is one which payment begin and end at fixed times.
2. Contigent annuity-it is one whose payment depend on an event that cannot be foretold
accurately.
Kinds of annuity certain:
1. Ordinary annuity-payment is done at the end of the term
2. Annuity due-payment is done at the beginning of the term
3. Deferred annuity-payment is not given in the beginning or end of a period but in some later
period.
Formulas for accumulated amount(F) of Annuities
𝑹[(𝟏+𝒊)𝒏 −𝟏]
F= (Ordinary)
𝒊

𝑹[(𝟏+𝒊)𝒏 −𝟏]
F= (1+i) (Annuity Due)
𝒊

R-periodic payment

Course Module
References and Supplementary Materials
Books and Journals
1. Richard Aufmann ,Joanne Lockwood ,Richard Nation ,Daniel Clegg ,Susanna S.
Epp;2018;Mathematics in the Modern World;Manila ,Philippines;Rex Bookstore,Inc
2. Susana S. Epp;2011;Discrete Mathematics:An Introduction to Mathematical Reasoning
;Brooks/Cole ;Cengage Learning
3. Darwin P. Paguio, et al;2013;Mathematics of Investment; Tinajeros,Malabon;
Jimczyville Publications

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