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Annuity Due: Prepared By: Ross Christian Manuel

An annuity due is an annuity where payments are made at the beginning of each payment period, with the first payment made at the beginning of the term and the last payment made one interval before the end of the term. The present value of an annuity due is the same as its value on the day of the first payment and is the sum of the present values of the payments. The amount of an annuity due is the same as its value at the end of the term and is the sum of the accumulated values of the payments at the end of the term. Formulas are provided to calculate the present value and amount of an annuity due. Examples demonstrate calculating monthly loan payments, present value, amount, and semi

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90 views11 pages

Annuity Due: Prepared By: Ross Christian Manuel

An annuity due is an annuity where payments are made at the beginning of each payment period, with the first payment made at the beginning of the term and the last payment made one interval before the end of the term. The present value of an annuity due is the same as its value on the day of the first payment and is the sum of the present values of the payments. The amount of an annuity due is the same as its value at the end of the term and is the sum of the accumulated values of the payments at the end of the term. Formulas are provided to calculate the present value and amount of an annuity due. Examples demonstrate calculating monthly loan payments, present value, amount, and semi

Uploaded by

joann lei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Annuity Due

Prepared by: Ross Christian Manuel


ANNUITY DUE
• It is an annuity in which the payment is
made at the beginning of each payment
interval.
• This means that the first payment is
made at the beginning of the term,
moving the last payment one interval
before the end of the term.

03 – 30 - 19 2
Present value of an Annuity Due
• It is the same as its value on the day of
the first payment.
• It is also the sum of the present values of
the payments.

03 – 30 - 19 3
Amount of Annuity Due
• It is the same as its value at the end of
the term.
• It is also the sum of the accumulated
values of the payments at the end of the
term.

03 – 30 - 19 4
Present value of an Annuity Due
Formula:

−(𝑛−1)
1− 1+𝑖
𝑃𝑉 = 𝑅 + 𝑅
𝑖

03 – 30 - 19 5
Amount of Annuity Due
Formula:

𝑛+1
1+𝑖 −1
𝐹𝑉 = 𝑅 −𝑅
𝑖

03 – 30 - 19 6
Example 1
Engr. Newmark borrows Php100,000 at 10%
effective annual interest. He must pay back
the loan over 30 years with a uniform monthly
payment due on the first day of each month.
What does Engr. Newmark pay each month?

Answer: Php 870.95

03 – 30 - 19 7
Example 2
If money is 4% compounded semi – annually,
find the present value and the amount of an
annuity due paying Php 500 semi – annually
for a term of 3.5 years.
Answer: PV = Php 3, 300.72
FV = 3,791.48

03 – 30 - 19 8
Example 3
Mr Ignacio invested Php 8,500 at the
beginning of every 6 months for 8 years. If the
fund earns 5% compounded semi – annually,
how much will be in the fund after 8 years?

Answer: Php 168,850.21

03 – 30 - 19 9
Example 4
A man agrees to make equal payments at the
beginning of every 6 months for 10 years to
discharge a debt of Php 500,000, which is
due as of date. If money is worth 8%
compounded semi – annually, find the semi –
annual payment.
Answer: Php 35, 375.84

03 – 30 - 19 10
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