3rdBUSMATH - BUSMATH (Business Math) BUSMATH (Business...

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Unformatted text preview: BUSMATH (Business Math) BUSMATH (Business Math) Kristine Joy E. Carpio Department of Mathematics De La Salle University – Manila Term 2 2009-2010 BUSMATH (Business Math) Outline Annuities and Perpetuities Ordinary Annuity Annuity Due Deferred Annuity BUSMATH (Business Math) Course Description This is a 3-unit course in business mathematics which covers pre-calculus algebra, theories of investment mathematics, and their applications to commerce and economics. The course also introduces students to the rudiments of financial mathematics. Discussions on logarithms, sequences, binomial theorem, simple and compound interest are likewise included. BUSMATH (Business Math) Annuities and Perpetuities Annuity Definition An annuity is a sequence of periodic payments made at equal intervals of time and most of the time in equal amounts. The time between two consecutive payments of annuity is called payment interval and is equivalent to one period . The total number of periods is the same as the total number of payments. Payments maybe made monthly, quarterly, semi-annually, annually or at other periods. The term of each annuity starts immediately and ends on the last payment interval. The size of each payment is termed as periodic rent or periodic payment , and is denoted by R . BUSMATH (Business Math) Annuities and Perpetuities Examples of annuities are a. monthly payments of rent b. weekly wages c. annual premiums on a life insurance policy d. periodic pensions e. periodic payments on installment purchases f. semi-annual interest payments on a bond BUSMATH (Business Math) Annuities and Perpetuities Types of Annuities a. Annuity Certain Definition An annuity certain is an annuity in which payment begin and end at fixed times. b. Contingent Annuity Definition A contigent annuity is a sequence of periodic payments in which the payments extend over an indeterminate length of time. BUSMATH (Business Math) Annuities and Perpetuities Types of Annuities Certain a. Ordinary Annuity Definition An ordinary annuity is a sequence od periodic payments made at the end of each period. b. Annuity Due Definition An annuity due is a sequence of periodic payments made at the start of each period. c. Deferred Annuity Definition A deferred annuity is a sequence of periodic payments in which the first payment is not made at the beginning nor at the end of the first period but at some later date. BUSMATH (Business Math) Ordinary Annuity Present Value Definition The present value of an ordinary annuity, denoted by A , is the sum of the discounted payments at the beginning of the term. This is the value at the beginning of the term; this is the value before the first payment. The sum of the periodic payments discounted to the present time is A = R (1 + i )- 1 + R (1 + i )- 2 + ··· + R (1 + i )- n = R 1- (1 + i )- n i where R is the periodic payment of the annuity, i is the interest rate per period and n is the total number of payments or period. BUSMATH (Business Math) Ordinary Annuity...
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This note was uploaded on 11/22/2011 for the course MATHEMATIC 1 taught by Professor Arceta during the Spring '11 term at De La Salle University.

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3rdBUSMATH - BUSMATH (Business Math) BUSMATH (Business...

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