Ordinary Annuity Quiz

Which of the following statements is correct?

• a. Pro Life will result in a future value of ordinary annuity at Php 1,768,385.94

• b. FVD Life will result in a future value of ordinary annuity at Php 1,593,742.46

• c. ALA Philippines will result in a future value of ordinary annuity at Php Php 1,886,683.88

Answer explanation

Pro Life Computation

A = 125,000

R = 0.15

T = 5 years

M = 2

FVoa = 125,000 x 14.15

FVoa = Php 1,768,385.94

Decide which plan will help you cover the down payment?

• a.       Pro Life

• b.      FVD Life

• c.       ALA Philippines

Answer explanation

FVD

What is the total interest earned from the ordinary annuity policy from FVD Life?

• a.       Php 518,385.94

• b.       Php 593,742.46

• c.       Php 386,683.88

Answer explanation

Total Payments = Php159,000*2*5 = Php1,500,000

Interest earned = Total payments-PV of Ordinary Annuity

Interest earned = 1,886,683.88-1,500,000

Interest earned = 386,683.88

How much money should you deposit each month?

• Php 15,653.10

• Php 16,735.51

• Php 20,500.00

Answer explanation

Given the monthly deposit of Php 16,735.51, how much money will you have in this account at the time you want to purchase the car?

• Php 1,200,001.06

• Php 1,200,000.04

• Php 1,100,000.00

Answer explanation

Which is better to invest into, ordinary annuity or annuity due?

• Ordinary Annuity

• Annuity Due

Answer explanation

Ordinary Annuity

Ordinary annuity might be favorable to you because you are able to use those funds for the entire period before paying.

Annuity Due

*** Annuity Due is favorable if you are the payee because you receive the payment upfront for a specific period and allows you to use the funds immediately and enjoy higher present value.

Which of the following statements is incorrect:

• ManoLife requires Php6,281,134.73 investment.

• AZA requires Php6,668,697.24 investment.

• Starlife requires Php7,676,942.44 investment.

Answer explanation

Starlife requires Php8,333,892.22 investment.

Decide which plan is the most suitable for the current amount you are willing to invest for your future plans.

• ManoLife

• StarLife

• AZA

Answer explanation

ANSWER: AZA. Because it does not exceed the amount you’re willing to invest and it will generate a monthly payment of Php60,000.

How much is the total interest that will be earned from the investment in AZA?

• 4,866,107.78

• 7,731,302.76

• 14,931,302.76

Answer explanation

Computation:

Total Payments = Php60,000*12*20 = Php14,400,000

Interest earned = Total payments-PV of Ordinary Annuity

Interest earned = 14,400,000-6,668,697.24 

Interest earned = 7,731,302.76

You are now 60 years old and have officially retired. You have decided to invest a portion of your retirement fund on a sinking fund from SecureBank. Your target accumulated amount is PHP2,000,000 in 12 years. 

Assuming an interest rate of 5% and quarterly payments, how much do you need to deposit per quarter?

• PHP35,326.45

• PHP30,721.70

• PHP30,661.50

Answer explanation

48 quarterly payments of PHP30,661.50 will accumulate to the PHP2,000,000 you need for your sinking fund.