# ordinary annuity

**Situation**

An investment of P250,000 is made at the end of each year with interest of 2.5% compounded annually.

- Determine the equal-payment-series compound-amount factor after 10 years.
A. 11.203 C. 9.632 B. 10.578 D. 8.736 - Determine the total amount of the investment after 10 years.
A. P2,800,000.00 C. P2,400,000.00 B. P2,600,000.00 D. P2,200,000.00 - How long (in years) will it take for the investment to amount to P10,000,000.00?
A. 25 C. 15 B. 18 D. 28

## Derivation of Formula for the Future Amount of Ordinary Annuity

The sum of ordinary annuity is given by

$F = \dfrac{A[ \, (1 + i)^n - 1 \, ]}{i}$

To learn more about annuity, see this page: ordinary annuity, deferred annuity, annuity due, and perpetuity.

### Derivation

$F = \text{ Sum}$

$F = A + F_1 + F_2 + F_3 + \cdots + F_{n-1} + F_n$

$F = A + A(1 + i) + A(1 + i)^2 + A(1 + i)^3 + \cdots + A(1 + i)^{n-1} + A(1 + i)^n$

## Types of Annuities

**Types of Simple Annuities**

In engineering economy, annuities are classified into four categories. These are: (1) ordinary annuity, (2) annuity due, (3) deferred annuity, and (4) perpetuity. These four are actually simple annuities described in the previous page.

- Read more about Types of Annuities
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