Sample Problem Ordinary Annuity, Annuity Due, Deferred Annuity
1. You decide to make monthly contributions of PHP 5,000 into an investment
account that earns 8% interest per year, compounded monthly. After 5 years,
what will be the total amount accumulated in the account?
2. A company makes quarterly deposits of PHP 10,000 into a fund that earns
6% interest annually, compounded quarterly. The deposits are made at the
beginning of each period. Calculate the balance of the fund at the end of 4
years.
3. You plan to deposit PHP 3,000 each month into a deferred annuity account
that pays 9% annual interest, compounded monthly. Deposits will begin 3
years from now and will continue monthly for a period of 7 years.
Determine the future value of the annuity at the end of the payment period.
4. An investor plans to withdraw PHP 15,000 annually from an investment
account over a period of 10 years. The account earns 5% interest
compounded annually. Calculate the present value the investor needs to have
in the account to fund these withdrawals.
5. A company aims to accumulate PHP 500,000 in 5 years. To achieve this, it
will make equal deposits at the beginning of each year into an account
earning 4% interest compounded annually. Calculate the amount of each
deposit required to reach the target amount.
6. You wish to set up a deferred annuity to receive PHP 100,000 annually for
10 years, starting 5 years from today. Assuming a 7% interest rate
compounded annually, calculate the amount of money you need to invest
today to fund this annuity.
7. Determine the present value of an ordinary annuity that pays PHP 8,000 at
the end of each month for 3 years, given an interest rate of 10% compounded
monthly.
8. You are planning to save PHP 200,000 for a down payment on a property in
3 years. To achieve this goal, you will make equal monthly deposits into an
account earning 6% interest, compounded monthly, with deposits made at
the beginning of each month. Calculate the amount of each monthly deposit.
9. A person wants to establish a deferred annuity that will provide PHP 12,000
monthly for 10 years, beginning 5 years from now. The account earns 6%
interest compounded monthly. Calculate the present value of the initial
investment needed today to fund this annuity.
10. How much must you deposit at the end of each quarter into an ordinary
annuity account that earns 8% interest compounded quarterly to accumulate
PHP 1,000,000 after 15 years?