2

General Annuity
An annuity wherein the interest
conversion period is unequal or not
the same as the payment interval.
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Future Value of General Ordinary Annuity

The amount or future value of general ordinary annuity is given by

(1 + 𝑖)𝑛 −1
𝐹𝑉 = 𝑃
(1 + 𝑖)𝑏 −1
 4

Where
P = regular payment
𝑟
i = rate per conversion period ( i = where r is the annual
𝐾
rate and K is the no. of conversion periods in a year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝑝
b = where p is the no. of months in a payment interval
,
𝑐
and c is the number of months in a compounding period.
 5
Example:
1. P2500.00 will be invested in an account at the end of each
year at 4% compounded semi-annually. Find the size of the
fund at the beginning of the 16th year.

Given:
P = 25000
t= 15 years
K=2
n= 15(2) =30
i = 𝑟/𝐾 = 4%/2 = 0.02
c=6
p = 12
b = p/c =12/6 or 2
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2. Efren will deposit P2000.00 at the end of each quarter in a

bank which credits interests semi-annually at the rate 4%.
Find the sum to Efren’s credit at the beginning of the 6th year.

Given:
P = 2000
t= 5 years
K=2
n= 5(2) =10
i = 𝑟/𝐾 = 4%/2 = 0.02
c=6
p = 12
b = p/c =12/6 or 2
 7

Present Value of General Ordinary Annuity

The amount or present value of general ordinary annuity is given by:

1 − (1 + 𝑖)−𝑛
𝑃𝑉 = 𝑃
(1 + 𝑖)𝑏 −1
 8

Where
P = regular payment
𝐫
i = rate per conversion period ( i = where r is the annual
𝐊
rate and K is the no. of conversion periods in a year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝐩
b= , where p is the no. of months in a payment interval
𝐜
and c is the number of months in a compounding period.
 9
Example:
1. Find the present value of an ordinary of P2000 payable
annually for 9 years if the money is worth 5%
compounded quarterly.
Given :
P = 2000
t= 9 years
K=4
n= 9(4) =36
i = 𝑟/𝐾 = 5%/4 or 0.0125
c=3
p = 12
b = p/c =12/3 or 4
 10
2. Find the amount of an annuity of P50,000.00 payable
semi-annually for 5 years if money is worth 6% compounded
quarterly.
Given :
P = 50,000
t= 10 years
K=4
n= 5(4) =20
i = 𝑟/𝐾 = 6%/4 or 0.015
c=3
p = 12
b = p/c =12/3 or 4
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3. What is the present value of a general ordinary annuity of
P4,200.00 per quarter for 10 years if money is worth 9%
compounded semi-annually?
Given :
P = 4,200
t= 10 years
K=2
n= 10(2) =20
i = 𝑟/𝐾 = 9%/2 or 0.045
c=6
p = 12
b = p/c =12/6 or 2
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Future Value of General Annuity Due Formula:

(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +𝒊
𝒊 (𝟏+𝒊)𝒃 −𝟏

Present Value of General Annuity Due

𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏
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Where:
PV= Present Value
FV= Future Value
P= Annuity payment
𝑟
i= rate per compounding period ( i =where r is the
𝐾
annual rate and K is the no. of conversion periods in a
year.)
n = no. of conversion periods for the whole term ( n = t • K,
where t is the term of an annuity.)
𝐩
b = , where p is the no. of months in a payment interval and
𝐜
c is the number of months in a compounding period.
 15

Example: Future Value of General Annuity Due

1. Emy wants to save P100,000 for her first year college.
She deposits P3,500 at the beginning of each month in
an account that earns 4% per year compounded semi-
annually. Will Emy have enough money saved at the end
of 2 years?
Given:
P= 3500 c= 6
n= t • K= 2 • 2= 4 p= 1
𝒓 𝟒% 𝒑 𝟏
i= = or 0.02 b= =
𝑲 𝟐 𝒄 𝟔
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Solution:
(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 + 0.02
𝒊 (𝟏+𝒊)𝒃 −𝟏

(𝟏+𝟎.𝟎𝟐)𝟒 −𝟏 𝟎.𝟎𝟐
𝑭𝑽 = 𝟑𝟓𝟎𝟎 + 0.02
𝟎.𝟎𝟐 (𝟏+𝟎.𝟎𝟐)𝟏/𝟔 −𝟏

= 3500(4.12)(6.07)
=87529.4
Because P87 529.40 is less than P100 000, Emy will not
have enough money at the end of 2 years.
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2. Amy and Susan each makes regular deposits into an

annuity. Amy deposits P2000 at the and of each month
at 6% compounded quarterly. Susan deposits P6000 at
the end of each quarter at 6% compounded monthly.
Who will have the greater amount at the end of 5 years?
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Amy 𝒓 𝟔%
i= = or 0.015
𝑲 𝟒
Given
c= 3
P= 2000
p= 1
n= t • K= (5)(4)= 20
𝒑 𝟏
b= =
𝒄 𝟑
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Solution:

(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +i
𝒊 (𝟏+𝒊)𝒃 −𝟏

(𝟏+𝟎.𝟎𝟏𝟓)𝟐𝟎 −𝟏 𝟎.𝟎𝟏𝟓
𝑭𝑽 = 𝟐𝟎𝟎𝟎 + 0.015
𝟎.𝟎𝟏𝟓 (𝟏+𝟎.𝟎𝟏𝟓)𝟏/𝟑 −𝟏

= 2000(23.12) (3.03)
=P 140 107.20
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Susan 𝒓 𝟔%
i= = or 0.005
𝑲 𝟏𝟐
Given:
c= 1
P= 6000
p= 3
n= t • K= (5)(12)= 60
𝒑 𝟑
b= = or 3
𝒄 𝟏
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Solution:

(𝟏+𝒊)𝒏 −𝟏 𝒊
𝑭𝑽 = 𝑷 +i
𝒊 (𝟏+𝒊)𝒃 −𝟏

(𝟏+𝟎.𝟎𝟎𝟓)𝟔𝟎 −𝟏 𝟎.𝟎𝟎𝟓
𝑭𝑽 = 𝟔𝟎𝟎𝟎 + 0.005
𝟎.𝟎𝟎𝟓 (𝟏+𝟎.𝟎𝟎𝟓)𝟑 −𝟏

= 6000(69.77) (0.34)
=P 142 330.80
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Example: Present Value of General Annuity Due

1. Find the present value of an annuity due of P10
000 payable quarterly for 10 years if the money is
worth 6% compounded semi-annually.

Given:
𝒓 𝟔%
P= 10 000 i= = or 0.03
𝑲 𝟐
t= 10 years c= 6 , p= 3
𝒑 𝟑
K= 2 b= = or 0.5
𝒄 𝟔
n= t • K=(10)(2)= 20
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Solution:

𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏

𝟏 − (𝟏 + 𝟎. 𝟎𝟑)−𝟐𝟎 𝟎. 𝟎𝟑
𝑷𝑽 = 𝟏𝟎 𝟎𝟎𝟎 𝟎.𝟓
+ 𝟎. 𝟎𝟑
𝟎. 𝟎𝟑 (𝟏 + 𝟎. 𝟎𝟑) −𝟏

= 10 000 (14.88)(2.04)
= 303 552
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2. Find the present value of an annuity due of

P500 payable monthly for 8 years, if the money
is worth 4% compounded annually.

Given:
𝒓 𝟒%
P= 500 i= = or 0.04
𝑲 𝟏
t= 8 years c= 12
K= 1 p=1
𝒑 𝟏
n= t • K=(8)(1)= 8 b= = or 0.08
𝒄 𝟏𝟐
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Solution:

𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏

𝟏 − (𝟏 + 𝟎. 𝟎𝟒)−𝟖 𝟎. 𝟎𝟒
𝑷𝑽 = 𝟓𝟎𝟎 𝟏/𝟏𝟐
+ 𝟎. 𝟎𝟒
𝟎. 𝟎𝟒 (𝟏 + 𝟎. 𝟎𝟒) −𝟏

= 500 (6.73)(12.26)
= 41 254.90
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3. An item was acquired, which is paid for 9 years
with P3500 payments of the beginning of each
month by applying an interest rate of 21%
compounded quarterly. What is the cash value?

Given:
P= 3 500 i= 𝒓/𝑲= 21%/4 or
0.0525
t= 9 years c= 3
K= 4 p=1
n= t • K=(9)(4)= 36 b= 𝒑/𝒄= 3/𝟏 or 3
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Solution:

𝟏 − (𝟏 + 𝒊)−𝒏 𝒊
𝑷𝑽 = 𝑷 𝒃
+𝒊
𝒊 (𝟏 + 𝒊) −𝟏

𝟏 − (𝟏 + 𝟎. 𝟎𝟓𝟐𝟓)−𝟑𝟔 𝟎. 𝟎𝟓𝟐𝟓
= 𝟑 𝟓𝟎𝟎 𝟑 + 𝟎. 𝟎𝟓𝟐𝟓
𝟎. 𝟎𝟓𝟐𝟓 (𝟏 + 𝟎. 𝟎𝟓𝟐𝟓) −𝟏

= 3 500(16.03)(3.10)
= P 173 925.50
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