Course Name: BMTH 1003

28, 2015

Date: Oct
Deferred Annuities

Learners (who are they?):

Students of the programs: Honours

Bachelor of Commerce, and BAB
(Financial Services)

Level / Year of program:

First Semester

Topic:

Financial Mathematics I
BMTH1003

Context / Theme:

Amortization and Repayment of debt

Class Outcomes:

Evaluate the Present value, periodic

payment, the number of payments
and interest rate in applications
involving deferred annuities

What will students already

know or have been taught?

Students have some background in

compound interest, ordinary annuities,
and annuities due.

Resources Used:

PowerPoint presentation; Whiteboard,

Markets
Using BOPPPS Model of Teaching

Bridge-in and Pre-test

I will tell a story about my OSAP loan and ask the student to answer the
following questions. I will encourage discussion and the use of calculator
to answer the questions. At the same time, I will be checking what the
students already know about the topic.
The story
I finished my studies at the Teacher College Training Program at GBC on
March 26, 2009. At that time my OSAP debt was of $6,500. This balance

should have been paid with interest of 4.75% compounded monthly by

making payments at the end every month during 90 months.
The first payment was due on November of the same year. What
should be the size of my monthly payments?

Learning Objective
At the end of this lesson, you will be able to calculate the present
value, the size of the monthly payments and the term of a deferred
annuity, along with the value of the final payment.

Participatory Learning
Using a Power Point Presentation, the students and I will rethink the
questions of the pre-test. I will encourage participation and will be walking
around the classroom checking their work. Ill be explaining the concept of
deferred annuity while solving the problem. After this, we will work
together the following problems. I will use graphs (time lines), calculator
and formulas.
Suppose you want to withdraw $600 at the end of every month for 4
years. If the account pays 6% compounded quarterly, how much
should be in the account now if the withdrawals are deferred for six
months?
Find the discounted value of payments of $600 made at the end of
each quarter for eight years. The interest rate is 5% compounded
semi-annually and the first payment is deferred for 1 year.
A car is priced at $16200 requiring a down payment of 15% and equal
monthly payments for 5 years. If interest is 8% compounded quarterly,
and the first payment is deferred for 6 months, what is the size of the
monthly payments?
If payments are deferred for four months. For how long will Juliet have
to make payments if she agrees payments of $500 to repay a loan of
$5000 and interest is 8% compounded quarterly? The last payment is
less than $500 for sure. What is the size of this smaller concluding
payment?

Post-test
To determine if the student have indeed learned I will ask them to work the
following questions

.
Edmonton Pizza borrowed money to redesign their restaurant.
Payments of $1600 would be made at the beginning of each month for
two years, starting in eighteen months. Interest on the loan is 7.12%
compounded monthly. How much must the company borrow today?
Sharon plans to retire in fifteen years. To supplement her pension in
the first five years of retirement, she wants to be able to draw $200 at
the end of each month from a retirement fund that she intends to start
today. How much must she deposit today in order to carry out her plan
if money is worth 6.5 % compounded monthly?

Summary
I will give the following point to the students to summarize the lesson, I
will give them some hint to solve any problem involving a deferred annuity.

A deferred annuity is an annuity whose first payment is delayed for a

specific period of time called deferment period
Key for solving a problem of deferred annuity

Consider the Future value of the deferment period = The present value
of the annuity term.
If the question is related to the annuity term, start solving the problem
from the period of deferment
If the question is related to the deferment period, start solving the
problem
from the annuity term