Solution of Problems in Annuities of Organisational Finance


This is a humble request from you to find some useful tips on Annuity, Sir, I'm a student of Masters in Professional Accounting from Sydney University, Australia, I am facing problems in Annuity (both Future and Present).

I have been learning many things from your blog and I have also registered with ur email. So, Kindly email me regarding Annuities of Organisational Finance, one of the subjects of Masters.


Dear student,

For solving annuities problems of your organisational finance subject, you have to understand the meaning of annuity. After this, you can go deep in it.

Q:- 1.  What is Annuity?

Ans. : When you purchased an asset on credit, you have to pay the amount purchased asset in installments. That installment is called Annuity.

For Example

Suppose, you have to go to Sydney University, Australia from your house which is about 60 km. far from your own house where you are living. Now, you go to your local financial institute and finance your car. You can fix that you have to repay the amount of car with in 12 installments. These installments will be annuities.

More deep explanation of Annuity:

 Above was the simple definition and example of annuity but we can explain more deeply it. Above is only that type of annuity which is fixed for its future time . For example , if we purchase a car and if agreement fixes the 10 installment of payment , then these annuities will be called annuity certain. We also fix Perpetuity or perpetual annuity. It is that type of annuity which is payable all the time . There is no end of these annuities . For example , if a person has taken life insurance policy , then if he pays its premium up to his life , these these annuities will be called perpetuity or perpetual annuity.If  Any annuity whose payment is closed after some time , then these annuity is called forborne annuity .

I think you understand the meaning of Annuity and its different types. Now, I am taking second step for calculation of annuity. You have to understand the steps to calculate the annuity.

Q: 2 How to Calculate the Annuities?

Ans.  In organisational finance, we need to calculate different annuities different Techniques of Mathematics Finance.

First Technique of Calculating Annuity

If you have to buy any car , TV , or any other product , then this formula can used for calculating value of annuity . In many questions , you will see that buyer will pay some amount when he buys product , so deduct it from principle amount .

For example :

A man purchases a refrigerator by making a cash payment of Rs. 5000. In addition he has to pay Rs. 1000 at the end of each six month for 4 years. If money is worth 10% compounded semi-annually find cash- price for refrigerator.


This problem, we can only solve, if we know first technique to calculate the annuity.

Cash price of refrigerator - cash payment =

Value of Annuity X [ 1- (1+r/100) and its power minus t / r/100 ]


Cash price of refrigerator =

cash payment + Value of Annuity X [ 1- (1+r/100) and its power minus t / r/100 ]

cash price of refrigerator = 5000 + 1000{ 1- (1+5/100) power - 8 / 5/100 }

Cash price of refrigerator = Rs. 11466

Second Technique of Calculating Annuity

If you have created any fund to buy new fixed asset or repay the amount of long term loan or debentures,  then second formula is more simple than first

For example

A person sets up a sinking fund in order to collect RS. 50, 00, 000 after 19 years for his child education in Sydney University, Australia. How much amount should he set aside into an account paying 5% p.a. Compound half yearly.

Solution :

Total target of person to save = Rs. 50,00,000 in 10 years because he will send his child to Sydney university, Australia for higher education and I think Rs. 50,00,000 will be needed to go to Australia for study  in 2020.

rate = 5% p.a. or 5/2 % half yearly

time or t = 10 x 2 =20

Total saving =

Amount or annuity or installment for sinking fund { ( 1+r/100) power number of time - 1 / r/100}

50, 00, 000 =  Annuity  { ( 1+ 5/200) power 20 -1/ 5/100}

Amount of Annuity = 50,00,000 X 1000 / 4 X 675 = Rs. 185100.80

So, that person have save 185100.80 set aside every six month for his child education in Sydney university, Australia.






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Finance Journal Entries Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: Solution of Problems in Annuities of Organisational Finance
Solution of Problems in Annuities of Organisational Finance
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock