ESC 411

PROBLEM SET #1

NAME:___________________________________________________________ SCHEDULE:________________

Show complete solution and box the final answer. Round off intermediate and final values up to four decimal places.

1. An annual deposit of P20,000 was places on the fund at the end of year for 6 years. I f the fund invested has a rate
of 5% compounded annually, how much is the worth of the fund at the end of 9 years?

2. A house costs P2,000,000 cash. A purchaser will pay P90,000 cash, P60,000 at the end of 2 years and a sequence
of 6 annual payments starting at the end of 4 years, to discharge all his remaining liability as to the principal and
interest at 10% compounded annually, find the annual payments which must be made for 6years?

3. Mike purchased a small lot in a subdivision, paying P200,000 down and promising to pay P15,000 every 3 months
for the next 10 years. The seller figured interest at 12% compounded quarterly.

a. What is the cash price of the lot?

b. If Mike missed the first 12 payments, what must he pay at the time the 13th is due to bring himself up to date?
c. After making 8 payments, mike wished to discharged his remaining liability by a single payment at the time
when the 9th regular payment was must he pay in addition to the regular payments the due?
d. If mike missed the first 10 payments, what must he pay when the 11th payment is due to discharge his entire
indebtedness?

4. A farmer bought a tractor costing P50,000, payable in 12 semi-annual payments, each installment payable at the
beginning of each period. If the rate of interest is 20% compounded semi-annually, determine the amount of each
installment.

5. Mr. dela Cruz borrowed P1,000,000 at 10% interest compounded quarterly and payable every month for 5 years.
a. how much of the load remains unpaid immediately after he has paid the 12th payment?
b. What is effective annual interest rate?

6. To maintain the LRT, it is required to have P500,000 at the end of 5 years and annually thereafter. If money is
worth 5%, determine the cost of all future maintenance.

7. Determine the ordinary and exact simple interests on P5,500 for the period from January 5, 2002 to February 28,
2003, if the rate is 6.5%.

8. A man wishes his son to receive P 500, 000.00 ten years from now. What amount should he invest now
if it will earn interest of 10% compounded annually during the first 5 years and 15% compounded
quarterly during the next 2years and 12% compounded semiannually on the remaining years. What will
be the worth of the money on the 7th year?

9. A student plans to deposit P 1, 500 in the bank now and another P 1, 000 for the after two years. If he
plans to withdraw P 5, 000, 3 years after his last deposit for the purpose of buying shoes, what will be
the amount of money left in the bank after one year of his withdrawal? Effective annual interest rate is
10% .

10. Find the nominal rate which is converted quarterly could be used instead of 12% compounded semi-
annually.