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Comprehensive Guide to Simple Annuities: Terminologies, Types, and Problem Solving Techniques

Explore key concepts, formulas, and examples to understand simple annuities, including payment types, interest calculations, and solving real-world financial problems.

Economy & Finance◦
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Simple Annuities: Terminologies, Types, and Problem Solving Submitted by: Leonard L. Ancajas] Grade & Section: math ll C Date:August 4, 2026
annuity is a series of equal payments or receipts made at regular intervals (e.g., monthly, annually). A simple annuity is a specific type of annuity where the payment interval (how often you pay) is exactly the same as the compounding period (how often interest is calculated). • • Here is a breakdown of the terminologies, types, and how to solve problems involving simple annuities.
4.1 Terminologies and Notation • Before solving, it is essential to understand the variables used in annuity formulas: • • - A or PMT: The periodic payment or receipt amount. • ​ • - FV (Future Value) or S: The total accumulated amount of the payments at the end of the annuity term, including interest. • ​ • - PV (Present Value) or P: The current single lump-sum value of a series of future payments. • ​
i : The interest rate per payment/compounding period (Annual Interest Rate ÷ Number of periods per year). ​ - n: The total number of payments (Number of payments per year × Total number of years). ​ - m or k: The number of deferral periods for deferred annuities.
Problem Example: You deposit $500 at the end of every month for 3 years in an account that pays 6% compounded monthly. How much will you have at the end of 3 years?
Problem Example: You pay $200 at the beginning of each month for 5 years for a computer lease, at an interest rate of 12% compounded monthly. What is the Present Value (the equivalent cash price) of the lease?
Problem Example: You win a prize that pays $1,000 at the end of every year for 5 years, but the first payment is deferred for 3 years (meaning the first payment happens at the end of year 4). If money is worth 8% compounded annually, what is the prize worth today?
📊 ANNUTY TYPES — CLEAN & SIMPLE TABLE