This Self-Learning Module (SLM) is prepared so that you, our dear learners, can continue your studies and learn while at home. Activities, questions, directions, exercises, and discussions are carefully stated for you to understand each lesson.
Each SLM is composed of different parts. Each part shall guide you step-by- step as you discover and understand the lesson prepared for you.
Previously, you learned how to solve simple and general annuity. So far, all the problems on finding present and future values only dealt with a single cash flow which is either invested at the start (for future value problems) or to receive at the end (for present value problems). However, most of the financial events happening in people’s lives rarely happen in just a single event. It is common for workers to receive their salary twice a month or monthly, to pay loans, electricity, water, phone, and other utility bills monthly, and likewise, be able to set aside savings regularly with these normal routines in mind, it is then important to be able to set up a method to efficiently compute the future and the present value of a regular stream of cash flows.
This module will help you understand and explore deferred annuity or an annuity whose payments do not necessarily start at the beginning or at the end of the next compounding period. Example of which is the monthly pension that will start after five years if a certain employee avails the five-year lump sum upon retirement.
After going through this module, you are expected to:
1. calculate the present value and period of deferral of a deferred annuity; and
2. construct a time diagram for a deferred annuity.
Please use this module with care. Do not put unnecessary marks on any part of this SLM. Use a separate sheet of paper in answering the exercises and tests. And read the instructions carefully before performing each task.