Quarter 2, Week 2

Learning Activity Sheets (LAS) No. 5

Name of Learner: ___________________ Grade and Section: _________________

Date: _____________________________

GENERAL MATHEMATICS ACTIVITY SHEET

Illustrating Simple and General Annuities

I. Learning Competency with Code

Illustrates simple and general annuities. (M11GM-IIc-1)

II. Background Information for Learners

There are many practical examples of financial transactions involving
installments, such as car loan being repaid with equal monthly installments,
a retiree purchasing a pension plan from an insurance company upon his
retirement, a life insurance policy being purchased with monthly premiums,
or a bondholder receiving an income in the form of semi-annual coupon
payments. These are examples of payments by installment which are done
periodically, and equal in amounts.
This payments scheme is called annuity, which can be used to
accumulate funds (e.g. when you make regular deposits in a savings
account) or to pay out funds (e.g. when you receive payments from pension
plan after you retire).
Annuities, according to payment interval and interest period, can be
classified into two ways simple annuity and general annuity.
Important Terminologies:
• Annuity, A – a sequence of payments made at equal (fixed) intervals or
periods of time
• Payment interval, n – the time between successive payments
• Term of an annuity, t – time between the first payment interval and last
payment interval
• Regular or Periodic payment, R – the amount of each payment
• Amount (Future Value) of an annuity, F – sum of future values of all
the payments to be made during the entire term of the annuity
• Present value of an annuity, P – sum of present values of all the
payments to be made during the entire term of the annuity
• Simple Annuity – an annuity where the payment interval is the same as
the interest period
• General Annuity – an annuity where the payment interval is not the
same as the interest period
• Ordinary Annuity (Annuity Immediate) – a type of annuity in which the
payments are made at the end of each payment interval
• Annuity Due – a type of annuity in which the payments are made at the
beginning of each payment interval
• Annuity Certain – a type of annuity in which payments begin and end at
definite times

1
• Contingent Annuity – an annuity in which the payments extends over
an indefinite (or indeterminate) length of time
Illustration of Simple and General Annuity:
A. Simple Annuity
Example 1: Suppose Rodrigo, a high school student, would like to save
₱5,000 annually in a fund that gives 10% compounded annually. How
much is the amount or future value of his savings after 4 years?
Solution: Use the cash flow time diagram and compounding interest
𝑟 𝑛𝑡
formula F = 𝑃 ቀ1 + 𝑛ቁ to illustrate the annuity.
P 0 1 2 3 F
4 years
1 year 1 year 1 year 1 year
₱5,000 ₱5,000 ₱5,000 ₱5,000
1(0)
0.10
₱5,000ቀ1 + ቁ = ₱5,000
1
1(2)
0.10
₱5,000ቀ1 + ቁ = ₱5,500
1
1(2)
0.10
₱5,000ቀ1 + ቁ = ₱6,050
1
1(3)
0.10
₱5,000ቀ1 + ቁ = ₱6,655
1
Future Value (F) = ₱23,205
Therefore, the amount of his savings after 4 years is ₱23,205.

Example 2: How much money should you invest today in an account

that earns 5% compounded monthly in order to withdraw ₱10,000
every month for 6 months?
Solution: Use the cash flow time diagram and compounding interest
𝐹
formula P = 𝑟 𝑛𝑡
to illustrate the annuity.
ቀ1+ ቁ
𝑛
P 0 1 F
2 3 4 5 6 months
1 mo 1 mo 1 mo 1 mo 1 mo 1 mo
₱10,000 ₱10,000 ₱10,000 ₱10,000 ₱10,000 ₱10,000
0.05 1(1)
₱9,523.81 = ₱10,000ൗቀ1 + ቁ
1
0.05 1(2)
₱9,070.29 = ₱10,000ൗቀ1 + 1
ቁ
0.05 1(3)
₱8,638.38 = ₱10,000ൗቀ1 + 1
ቁ
0.05 1(4)
₱8,227.02 = ₱10,000ൗቀ1 + ቁ
1
0.05 1(5)
₱7,835.26 = ₱10,000ൗቀ1 + ቁ
1
0.05 1(6)
₱7,462.15 = ₱10,000ൗቀ1 + ቁ
1

₱50,756.91 = Present Value (P)

Therefore, the amount that you should invest is ₱50,756.91.

B. General Annuity
Example 1: Suppose Rodrigo change his mind and decided to save

2
 ₱5,000 annually in a fund that gives 10% compounded semi- annually.
How much is the amount or future value of his savings after 4 years? Will
he regret his decision of changing his investment?
Solution: Use the cash flow time diagram and compounding interest
𝑟 𝑛𝑡
formula F = 𝑃 ቀ1 + 𝑛ቁ to illustrate the annuity.

P 0 1 2 3 F
4 years
6 months 6 mo. 6 months 6 mo. 6 months 6 mo. 6 months 6 mo.
₱5,000 ₱5,000 ₱5,000 ₱5,000
2(0)
0.10
₱5,000ቀ1 + ቁ = ₱5,000
2
2(1)
0.10
₱5,000ቀ1 + ቁ = ₱5,512.50
2
2(2)
0.10
₱5,000ቀ1 + ቁ = ₱6,077.53
2
2(3)
0.10
₱5,000ቀ1 + ቁ = ₱6700.48
2

Future Value (F) = ₱23,290.51

Therefore, the amount of his savings after 4 years is ₱23,290.51

Example 2: How much money should you invest today in an account

that earns 5% compounded quarterly in order to withdraw ₱10,000
every year for 4 years?
Solution: Use the cash flow time diagram and compounding interest
𝐹
formula P = 𝑟 𝑛𝑡
to illustrate the annuity.
ቀ1+ ቁ
𝑛
P 0 1 2 3 F
4 years
Every 3 months Every 3 months Every 3 months Every 3 months
₱10,000 ₱10,000 ₱10,000 ₱10,000
0.05 4(1)
₱9,515.24 = ₱10,000ൗቀ1 + ቁ
4
0.05 4(2)
₱9,053.98 = ₱10,000ൗቀ1 + 4
ቁ
0.05 4(3)
₱8,615.09 = ₱10,000ൗቀ1 + ቁ
4
0.05 4(4)
₱8,197.46 = ₱10,000ൗቀ1 + 4
ቁ

₱35,381.77 = Present Value (P)

Therefore, the amount that you should invest is ₱35,381.77.

III. Accompanying DepEd Textbook and Education Sites

https://www.worldscientific.com/doi/pdf/10.1142/9789813224681_0002
https://www.youtube.com/watch?v=iYghPrs7JtM
https://www.youtube.com/watch?v=Xt0kh8VGF-I
General Mathematics Learner's Materials. Pasig City: Department of
Education - Bureau of Learning Resources, 2016, pp 168-204

IV. Activity Proper

General Directions: In answering the exercises in the Learning Activity
Sheet (LAS), please be reminded not to write anything here. All answers

3
 must be written in a separate sheet of paper. Read each problem carefully
and answer it systematically. If solution is required, encircle your final
answer.
Exercise 1: Miriam borrowed money and promised to cancel her debt 5
years by paying ₱3,500 at the end of each year with interest at 4%
compounded annually.
a. Draw and fill in ( ) to complete the cash flow time diagram Miriam
should follow to be able to reach her goal

P F
years

b. Miriam changed her goal and decided to pay ₱4,000 at 4% compounded

semi-annually, complete her new cash flow time diagram.

P F
years

Guide Questions:
1. What type of annuity is being described by the cash flow time diagram in
Exercise 1.a?
2. What type of annuity is being described by the cash flow time diagram
in Exercise 1.b?
3. What are the important data that you need in illustrating annuity?

Exercise 2: Study and illustrate the cash flow time diagram of the annuity
being referred to by the following problem:
a. Peter started to deposit ₱5,000 monthly in a fund that pays 1%
compounded monthly. How much will be in the fund after 8 months?
b. Ann’s parents are planning for a house lease agreement. How much
money will they prepare in a house that has 6% interest rate compounded
annually in order to pay ₱30,000 semi-annually for 5 years?
Guide Question:
1. What is your first step in illustrating an annuity problem?
2. What steps did you come up with to illustrate either the future value or
present value in the problem?
3. Which of the following showed simple annuity? general annuity?

V. Reflection
Instruction. Reflect on the following questions and write your response on
your journal.
1. Why is it necessary to illustrate annuity structure or arrangements?
2. What is the importance of knowing whether the problem or situation is
simple annuity or general annuity?
4
3. What values have been embedded to you by the process of illustrating
annuity?