Note: Formula:

Variables:
Sdef = Future value of a deferred annuity def
Adef = Present value of a deferred annuity def
R = Periodic payment of the deferred annuity
d = No. of compounding intervals in the period of deferral
j = Nominal interest rate
m= No. of conversion per year
t = Time period of the loan or investment
n = No. of payments in the annuity
i = Periodic interest rate

Chapter 6:

Section 6.4

2. If money is worth 15.3% compounded bimonthly, find the present value of P3,200 annuity
every 2 months, the first of which is due at the end of 4 years and the last at the end of 9 years.

Given:
R= P3,200
j= 15.3 % or 0.153
t1= 9 years
m= 6
n= 9(6) + 1 = 55
d= 6(4) - 1 = 23 periods
i= j/m = 0.153/6 = 0.0255

Required: Present Value (Adef)

Application:

Solution:

3,200 ¿]
3,200 ¿]
3,200 ¿)
3,200 ¿)
3,200 (16.4740786)
= P52,717.05153 or P52,717.05
Statement:
P52,717.05 will be the money’s present value.

4. If money is 8.4% compounded quarterly, find the present value of a sequence of six quarterly
payments of P930 each, the first of which is due at the end of 2 ¼ years. The term of the
annuity commences ¼ year before the first payment date, or at the end of 2 years.

Given:
R= 930
j= 8.4 % or 0.084
t1= 6 quarterly payments or 1 ½ year
m= 4 periods
n= t1m = (1 ½) (4)= 6
d= 2 ¼ (4)= 9 - 1 = 8
i= j/m = 0.084/4= 0.021

Required: Present Value (Adef)

Application:

Solution:

930 ¿]
930 ¿]
930 ¿)
930 ¿)
930 (4.72746945)
= P4,396.546588 or P4,396.55

Statement:
The present value will be P4,396.55.

6. What price will a finance company pay to a merchant for a conditional sale contract that
requires 18 monthly payments of P6,500 beginning seven months, if the finance company
requires a rate of return of 6.6% compounded monthly?

Given:
R= P6,500
j= 6.6% or 0.066
t1= 18 months or 1 ½ year
m= 12
n= t1(m) = 1 ½ (12) = 18 months
d= 6
i= j/m = 0.066/12 = 0.0055

Required: Present Value (Adef)

Application:

Solution:
6,500 ¿]
6,500 ¿]
6,500 ¿)
6,500 ¿)
6,500 (16.53964445)
= P107,507.6889 or P107,507.69

Statement:
The finance company will pay P107,507.69 to a merchant for a conditional sale contract.

8. What sum of money should be set aside today to provide an income of P37,250 a month for
a period of 7 years if the first payment is to be made 3 years hence and money is worth 12.6%
compounded monthly?

Given:
R = P37,250
j= 12.6% or 0.126
t1= 7 years
m= 12
n= 7(12)= 84
d= 12(3) - 1 = 36 - 1 = 35
i=j/m= 0.126/12= 0.0105

Required: Present Value (Adef)

Application:
Solution:
37,250 ¿]
37,250 ¿]
37,250 ¿)
37,250 ¿)
37,250 (38.59712807)
= P1,437,743.021 or P1,437,743.02

Statement:
P1,437,743.02 should be the sum of money that should be set aside today.

Section 6.5

2. A motorcycle costs P75,000. A buyer will pay P25,000 now and pay the balance in 5 annual
payments. The first payment is due in 3 years. If money is worth 10% effective, how much is the
annual payment?

Given:
Adef = P75,000 - P25,000 = P50,000
d = 3(1) - 1 = 2
m= 1
n = 5 annual payments
j = 10% or 0.10
i = j/m = 0.10/1 = 0.10

Required: Annual Payments (Periodic Payment)

Application:

Solution:

R = ¿]
R = ¿]
R = ¿]
R = ¿]
= P15,959.74759 or P15,959.75
Statement:
The annual payment for the motorcycle will be P15,959.75.

4. A rice field valued at P2,700,000 is sold today for P750,000 down payment. Mr. Nicolas
agrees to pay the balance with interest at 13.1% compounded semiannually by making 10 equal
semiannual payments, the first is due 4 years from today. Find the semiannual payments.

Given:
Adef = P2,700,000 - P750,000 = P1,950,000
d = 4(2) - 1 = 7
m= 2
n = 10 semiannual payments
j = 13.1% or 0.131
i = j/m = 0.131/2 = 0.0655

Required: Semiannual Payments (Periodic Payment)

Application:

Solution:

R = ¿]
R = ¿]
R = ¿]
R = ¿]
= P423,902.6426 or P423,902.64

Statement:
= The semiannual payment to pay the remaining balance of the rice field will amount to
P423,902.64.

6. Emmalou Rubio borrows P180,000 for the purchase of the machine. She plans to pay off the
loan with interest at 30 monthly payments, the first to be made 1 year and 3 months from now.
Find the monthly payment if money is worth 4.8% compounded monthly.

Given:
Adef = P180,000
d = 1 ¼ (12) - 1 = 14 months
m = 12
n = 30 monthly payments
j = 4.8% or 0.048
i = j/m = 0.048/12= 0.004

Required: Monthly Payment (Periodic Payment)

Application:

Solution:

R = ¿]
R = ¿]
R = ¿]
R = ¿]
= P6,745.848127 or P6,745.85

Statement:
P6,745.85 is the monthly payment of Emmalou Rubio.

8. A child aged 10 wins P1,000,000 on a TV quiz program. This amount is placed in a trust fund
earning 9.6% annually. If he takes the money in 5 equal annual payments with the first payment
to be made 8 years later, what would be the size of each payment?

Given:
Adef = P1,000,000
d = 8 - 1 = 7 years
m=1
n = 5 equal annual payments
j = 9.6% or 0.096
i = j/m = 0.096/1= 0.096

Required: Annual Payment (Periodic Payment)

Application:

Solution:
R = ¿]
R = ¿]
R = ¿]
R = ¿]
= P496,012.747 or P496,012.75

Statement:
The size of each payment will be P496,012.75.

Section 6.6

2. A P22,000 loan bearing interest at 9.6% compounded bimonthly was repaid, after a period of
deferral, by 16 bimonthly payments of P2,600. What was the time interval between the date of
the loan and the first payment?

Given:
Adef = P22,000
R = P2,600
j = 9.6% o 0.096
m=6
t = 16 bimonthly payments = 2 4/6 years or 2 2/3 years
i = j/m = 0.096/6 = 0.016
n = 16 bimonthly payments

Required: Length of Deferred Period

Application:

Solution:
d=log ¿ ¿

¿
{ [
log 2,600
0.2242877089
352 ]}
log (1.016)

log (0.2192361591)
¿
0.0068937079

= 31.80235691 or 31.80 or 32

Statement:
The time interval between the date of the loan and the first payment is 32 calendar bimonthly.

ANSWER:

Section 6.7

2. Mayrie Maurienne borrowed P65,000 from her brother Jesreal Eismar to buy a new cellular
phone. The interest rate being charged is only 8.2% compounded quarterly. She is to make the
first P7,300 quarterly payment on the loan 9 months later after the date of the loan. Measured
from the date of the first payment, how long will it take her to pay off the loan?

Given:
Adef = 65,000
R = 7,300
j = 8.2% or 0.082
d = 9 months = 3 quarterly payments —> 3 -1 = 2 quarter deferral payments
m=4
i = j/m = 0.082/4 = 0.0205
n=?

Required: Term of Deferred Annuity

Application:

Solution:
n=log ¿ ¿

log(0.8099051393)
¿
−log(1.0205)

−0.09156584518
¿
−0.0088130091
= 10.38985035 or 10.39 or 10

Statement:
Mayrie Maurienne will have to pay off her loan for 10 quarterly payments of P7300. Hence, the
full payment will last for 2 ½ years.
Chapter 7
https://docs.google.com/presentation/d/1FPeBZo7qA4TMZ8Az7ixJwuizJoGvFq32/
edit#slide=id.p1

Snc- Future Value of an Ordinary General Annuity

Anc- Present Value of an Ordinary General Annuity
R- Size of the Periodic Payment
j- Nominal Interest Rate
m- Number of Conversion per year
t- Time Period (term) of the loan/investment
k- Number of Payments per year
n- Number of Payments (tk)
i-Interest Rate per Conversion Period j/m
f- Effective Interest Rate per Payment Interval
c- Number of Conversion Period per Payment Interval m/k

Section 7.4

2. Find the future value of P8,500 payable at the end of every quarter for 4 years at 12%
compounded monthly?
Given:
R = 8,500
k=4
j = 12% or 0.12
t = 4 years
m = 12
n = t(k) = 4(4) = 16
i = j/m = 0.12/12 = 0.01
c = m/k = 12/4 = 3
Solution:
f = ¿¿
f = ¿¿
f = ¿¿
❑
f = 1.030301−1
f = 0.030301
F 7-3 -> Snc = R ¿]
Snc = 8,500 ¿]
Snc = 8,500 ¿]
Snc = 8,500 ¿)
Snc = 8,500 ¿)
Snc = 171,740.921432 or 171,740.92
4. Cindy Alapan decides to save P2,700 at the end of every 6 months, which is the amount
paid into her retirement plan by the company where she works. If she chooses an investment
fund that guarantees 8% per year compounded quarterly, how much will she have in 10
years?
Given:
R = 2,700
k=2
j = 8% or 0.08
t = 10 years
m=4
n = t(k) = 10(2) = 20
i = j/m = 0.08/4 = 0.02
c = m/k = 4/2 = 2
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.0404−1
❑
f = 0.0404
F 7-3 -> Snc = R ¿]
Snc = 2,700 ¿]
Snc = 2,700 ¿]
Snc = 2,700 ¿)
Snc = 2,700 ¿)
Snc = 2,700 ¿)
Snc = 80,735.3240535 or 80,735.32

Section 7.5

2. What is the present value of an annuity of P7,300 per semiannual period for 7 years at an
interest rate of 9% compounded annually?
Given:
R = 7,300
k=2
j = 9% or 0.09
t = 7 years
m=1
n = t(k) = 7(2) = 14
i = j/m = 0.09/1 = 0.09
c = m/k = ½ = 0.5
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.04403065089−1
❑
f = 0.04403065089
F 7-4 -> Anc = R ¿]
Anc = 7,300 ¿]
Anc = 7,300 ¿]
Anc = 7,300 ¿)
Anc = 7,300 ¿)
Anc = 7,300 ¿)
Anc = 75,098.8219758 or 75,098.82

4. Leander Barrot has decided to make semiannually payments of P7,800 at the end of every
three months for 8 years into an investment that he thinks will yield 7% compounded
semiannually, what lump sum deposited today that will result to the same future value?
Given:
R = 7,800
k=4
j = 7% or 0.07
t = 8 years
m=2
n = t(k) = 8(4) = 32
i = j/m = 0.07/2 = 0.035
c = m/k = 2/4 = 0.5
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.01734949747−1
❑
f = 0.01734949747
F 7-4 -> Anc = R ¿]
Anc = 7,800 ¿]
Anc = 7,800 ¿]
Anc = 7,800 ¿)
Anc = 7,800 ¿)
Anc = 7,800 ¿)
Anc = 190,304.871616 or 190,304.87

Section 7.6
2. In order to have P138,000 at the end of 6 years, what equal deposits must one invests at the
end of every six months at 6,6% compounded annually?
Snc = 138,000
k=2
j = 6.6% or 0.066
t = 6 years
m=1
n = t(k) = 6(2) = 12
i = j/m = 0.066/1 = 0.066
c = m/k = 0.5
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.03247275993−1
❑
f = 0.03247275993
Snc f
Formula 7-5 -> R=
¿¿
R=138,000 ¿¿
4,481.24087051
R=
¿¿
4,481.24087051
R=
1.46738213769−1
4,481.24087051
R=
0.46738213769
R=9,587.95920755∨9,587.96

4. SSS Information Technology Inc. needs to accumulate P650,000 in 2 years to meet future
needs. What regular payment would they need to make at the end of each quarter, at 12%
interest compounded monthly? (Future Value of Periodic Payment Formula 7-5)
Snc = 650,000
k=4
j = 12% or 0.12
t = 2 years
m = 12
n = t(k) = 2(4) = 8
i = j/m = 0.12/12 = 0.01
c = m/k = 12/4 = 3
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.030301−1
❑
f = 0.030301
 Snc f
Formula 7-5 -> R=
¿¿
650,000 (0 .030301)
R=
¿¿
19,695.65
R=
¿¿
19,695.65
R=
1.26973464853−1
19,695.65
R=
0.26973464853
R=73,018.6133199∨73,018.61

Section 7.7

2. How long will it take for annual year-end contributions of P49,000 to an Educational Savings
Plan to grow to P800,000 if the Educational Savings Plan earns 13% compounded
semiannually? (Future Value of Terms Formula 7-7)
Snc = 800,000
R= 49,000
k=1
j = 13% or 0.13
m=2
i = j/m = 0.13/2 = 0.065
c = m/k = 2/1 = 2
Solution:
f = ¿¿
f = ¿¿
f = ¿¿
❑
f = 1.134225−1
❑
f = 0.134225
Snc f
log [ +1]
Formula 7-7 -> R
n=
log (1+ f )
800,000(0.134225)
l og [ +1]
49,000
n=
log (1+ 0.134225)
107,380
l og [ + 1]
49,000
n=
log(1.134225)
l og (2.19142857143+1)
n=
l og(1 .134225)
 l og (3.19142857143)
n=
log (1.134225)
0.50398512876
n=
0.05469921554
n=9.21375423367∨9

Section 7.9

2. When Emmanuel Sirug was born, his parents began depositing P6,230 at the beginning of
every month into an annuity to save for his college education. If the account paid 9.6% interest
compounded semiannually for 16 years, how much is the account worth now that Emmanuel is
16 years old and is ready for college?
R= 6,230
k = 12
j = 9.6% or 0.096
t = 16
m=2
n = t(k) = 16(12) = 192
i = j/m = 0.096/2 = 0.048
c = m/k = 2/12
f = ¿¿
= ¿¿
❑
= 1.007844539−1
❑
¿ 0.007844539

n+1
(1+ f ) −1
S(due)c =R [ −1]
f
192+1
(1+0.007844539) −1
S(due)c =6,230 [ −1]
0.007844539
193
(1 .007844539) −1
S(due)c =6,230 [ −1]
0.007844539
4.518086667−1
S(due)c =6,230( −1)
0.007844539
3.518086667
S(due)c =6,230( −1)
0.007844539
S(due)c =6,230( 448.4758973−1)
S(due)c =6,230( 447.4758973)
S(due)c =¿ 2,787,774.84
4. If P5,400 is deposited at the beginning of each month in a fund that pays 12.8% compounded
quarterly, what is the amount in the fund at the end of 5 years? (Future Value of General
Annuity Due Formula 7-9)
R= 5,400
k = 12
j = 12.8% or 0.128
t=5
m=4
n = t(k) = 5(12) = 60
i = j/m = 0.128/4 = 0.032
c = m/k = 4/12 or 0.33333333333
Solution:
f = ¿¿
❑
f = 1.01055486944−1
❑
f = 0.01055486944
Formula 7-9 -> S❑(due )c =R ¿
S❑(due )c =5,400 ¿
S❑(due )c =5,400 ¿
1.89737793126−1
S❑(due )c =5,400( −1)
0.01055486944
0.89737793126
S❑(due )c =5,400( −1)
0.01055486944
S❑(due )c =5,400(85.0202777365−1)
S❑(due )c =5,400(84.0202777365)
S❑(due )c =453,709.499777∨453,709.50

Section 7.10

2. Find the present value of an annuity due of 14,200 payable monthly for 8 years, if money is
worth 7.3% compounded annually?
R= 14,200
k = 12
j = 7.3% or 0.073
t = 8 years
m=1
n = t(k) = 8(12) = 96
i = j/m = 0.073/1 = 0.073
c = m/k = 1/12
f = ¿¿
f = ¿¿
❑
f = 1.00588881−1
 ❑
f = 0.00588881

[ ]
1−n
1−(1+ f )
A(due)c =R +1
f

[ ]
1−96
1−(1+0.00588881)
A(due)c =14,200 +1
0.00588881

[ ]
95
1−(1 .00588881)
A(due)c =14,200 +1
0.00588881

A(due)c =14,200
[ 1−1.746701451
0.00588881
+1
]
A(due)c =14,200
[ 0.746701451
0.00588881
+1
]
A(due)c =14,200 [ 126.8000582+1 ]
A(due)c =14,200 [ 127.8000582 ]
A(due)c =1,814,760.826

4. An air-conditioning unit may be purchased by paying P2,500 down and 12 monthly payments
of P2,500 each. What is the present value if interest is computed 6.12% compounded
bimonthly?
R= 2,500
k = 12
j = 6.12% or 0.0612
t = 1 year
m=6
n = t(k) = 1(12) = 12
i = j/m = 0.0612/2 = 0.0306
c = m/k = 2/12
Solution:

[ ]
1−12
1−(1+0.005036165)
A(due)c =2,500 +1
0.005036165

[ ]
11
1−(1.005036165)
A(due)c =2,500 +1
0.005036165

[ ]
❑
1−(1.056814067)
A(due)c =2,500 +1
0.005036165

[ ]
❑
0 .056814067
A(due)c =2,500 +1
0.005036165
A(due)c =2,500 [ 11.28121636+ 1 ]
A(due)c =2,500 [ 12.28121636 ]
A(due)c =¿ 30,703.0409
Section 7.11

2. What equal amount at the beginning of each quarter must be deposit in a fund that earns
interest at 12% compounded monthly in order to accumulate P72,000 in 3 years?
S(due)c= 72,000
k=4
j = 12% or 0.12
t = 3 Years
m = 12
n = t(k) = 3(4) = 12
i = j/m = 0.12/12 = 0.01
c = m/k = 12/4 = 3
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.030301−1
❑
f = 0.030301
Formula 7-11 -> R=¿
R=¿
R=¿
2,181.672
R=
1.4741225085−1.030301
2,181.672
R=
0.4438215085
R=4,915.65180645∨4,915.65

4. Allan del Rosario wants to start saving immediately for a trip to Macau one year from now. He
wants to accumulate P220,000 for the trip. Her savings account pays 12% compounded
bimonthly. What must she deposit at the beginning of every month to reach the target in one
year?
S(due)f = 220,000
k = 12
j = 12% or 0.12
t = 1 Year
m=6
n = t(k) = 1(12) = 12
i = j/m = 0.12/6 = 0.02
c = m/k = 6/12 = 0.5
Solution:
f = ¿¿
f = ¿¿
❑
f = 1.00995049384−1
 ❑
f = 0.00995049384
Formula 7-11 -> R=¿
R=¿
R=¿
2,189.10864397
R= ❑
1.13736829148−1.00995049384
2,189.10864397
R=
0.12741779763
R=17,180.5562856∨17,180.56

Section 7.12

2. How long can an account sustain bimonthly withdrawals of P7,900 beginning today if the
account contains P160,000 and earn 12.6% compounded annually?
Adue = 160,000
R= 7.900
k=6
j = 12.6% or 0.126
m=1
i = j/m = 0.126/1 = 0.126
c = m/k = 1/6
f = ¿¿
f = ¿¿
f = ¿¿
❑
f = 1.019975481−1
❑
f = 0.019975481

n=1−
[
log 1−
( A(due )c −R)f
R ]
log (1+f )

n=1−
[
log 1−
(160,000−7,900)0.019975481
7,900 ]
log (1+0.019975481)

n=1−
[
log 1−
(152,100)0.019975481
7,900 ]
log (1.019975481)
n=1−
[ 3,038.27066
log 1−
7,900 ]
log (1.019975481)

log [ 1−0.384591222 ]
n=1−
log (1.019975481)
log [ 0.615408778 ]
n=1−
log (1.019975481)
−0.210836313
n=1−
0.008589731963
n=1−(−24.54515632)
n=1+24.54515632
n=25.54515632 or 26