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    Deferred Annuity

    Uploaded by

    Caitlin Tish

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Deferred Annuity

    Uploaded by

    Caitlin Tish
    26 views22 pages

    Copyright

    © © All Rights Reserved

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    PPTX, PDF, TXT or read online from Scribd

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    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    26 views22 pages

    Deferred Annuity

    Uploaded by

    Caitlin Tish

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 22

    Deferred

    Annuity
    OBJECTIVES:
    1. Define deferred annuity.
    2. Identify the payment interval
    3. Determine the period of deferral
    (k) of deferred annuity.
    4. Compute the total number of
    payments (n) of deferred annuity.
    Definition of Terms
    Deferred Annuity – an annuity
    that does not begin until a given
    time interval has passed.
    Period of deferral (k) – time
    between the purchase of an annuity
    and the start of the payments for the
    deferred annuity.
    EXAMPLE 1.
    Determine the period of deferral and
    the number of payments of the
    following:
    1. Monthly payments of P2,000 for 5
    years that will start 7 months from
    now.
    Period of deferral: 6 months
    m= 12 k = 6
    n = 12 (5)= 60
    EXAMPLE 2.
    Determine the period of deferral and
    the number of payments of the
    following:
    2. Quarterly payments of P5,000 for 8
    years starting at the end of two years.
    Period of deferral: 7 quarters
    m= 4 k=7
    n = 4 (8)= 32
    EXAMPLE 3.
    Determine the period of deferral and
    the number of payments of the
    following:
    3. Annual payments of P6,000 for 13
    years that will start 6 years from now.
    Period of deferral:
    m= k =
    n=
    Activity: May K Na!
    Directions: Find the payment
    interval (m), period of deferral (k),
    and total number of payments (n) of
    the following:
    1. Monthly payments of P10,
    000
    for 3 years that will start 9
    Activity: May K Na!

    1. Monthly payments of P10,


    000
    for 3 years that will start 9
    months from now.
    Activity: May K Na!

    2. Quarterly payments of
    P300
    for 9 years that will start 1
    year from now.
    Group Activity: May K Na!
    3. Semi- annual payments of
    P6,000 for 13 years that
    will
    start 4 years from now.
    Group Activity: May K Na!
    4. Payments of P25,000 every

    year for 12 years starting


    at
    the end 5 years.
    Group Activity: May K Na!
    5. Payments of P6,000 every
    month for 6 years starting
    at the end 8 months.
    Group Activity: May K Na!
    6. Payments of P10,000 every 2
    years for 30 years starting at
    the end of 6 years.
    Evaluation:
    Directions: Compute the period of deferral,
    payment interval and number of payments of
    deferred annuity.
    1.Monthly payments of P2,500 for 8 years
    that will start at the end of 4 months.
    2.Annual payments of P20,000 for 10
    years that will start at the end of 6
    years.
    3.Payments of P100,000 every 2 years for
    6 years that will start at the end of 5
    Formula:
    R - regular payment
    k – period of deferral
    n – total number of payments
    j – interest per period
    Example 1
    1. Ben availed of a loan from a bank that gave him
    an option to pay P20,000 monthly for 2 years.
    The first payment is due after eight months. How
    much is the present value of the loan if the
    interest rate is 10% compounded monthly.
    Given: ( Simple annuity)
    R = 20,000 t=2 i = 10% =
    12 = 12
    n = 24 k= 7
    Solution:
    Practice Exercise:

    1.A condominium unit is available


    at P29,000 monthly payable in
    20 years. The first payment is
    due in two years. How much is
    the cash value if the interest rate
    is 8% convertible quarterly.
    Practice Exercise:
    2. A credit card company offers a
    deferred payment option for the purchase
    of any appliance. Rose plans to buy a
    smart television set with monthly
    payments of P4,000 for 2 years. The
    payments will start at the end of 3
    months. How much is the cash price of the
    TV set if the interest rate is 10%
    compounded monthly?
    Evaluation:
    1.A savings account may allow
    the owner to withdraw P30,000
    semi- annually for 3 years
    starting at the end of 2 years.
    How much is the savings if the
    interest rate is 4% converted
    semi- annually.
    Evaluation:
    Peter bought a motorcycle on an
    installment basis. He will pay P3,500
    monthly for 3 years and the first
    payment will start 5 months from now
    with interest of 6% monthly. What is the
    present value of the motorcycle?
    Thank you!

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