TASK # 3 - PRACTICE PROBLEMS.

ANNUITIES

Answer the Following.

1. Mr. Reyes borrows P600, 000 at 15% compounded annually, agreeing to repay the loan in 13
equal annual payments. How much of the original principal is still unpaid after he has made the
8th payment?

2. An asphalt road requires no upkeep until the end of 2 years when P60, 000 will be needed for
repairs. After this P90, 000 will be needed for repairs at the end of each year for the next 5 years,
then P120, 000 at the end of each year for the next 5 years.
If money is worth 14% compounded annually, what was the equivalent uniform annual cost for
the 12-year period?

3. Determine the present worth and the accumulated amount of an annuity consisting of 6 payments
of P120, 000 each, the payment are made at the beginning of each year. Money is worth 15%
compounded annually.

4. Equal End-of-year payments of $263.80 each are being made on a $1000 loan at 10% effective
interest per year.

(a) How many payments are required to repay the entire loan?

(b) Immediately after the second payment, What lumpsum payment would completely pay off the loan?

5. Find the Present Worth of a P 70,000 expense every 3 years, starting 10 years from the present and
continuing Forever, at i=6%.

6. A present obligation of P350,000 is to be repaid in equal uniform amounts, each of which includes
repayment of the debt (principal) and interest on the debt, over a period of 6 years if the effective
interest rate per year is 10%, what is the amount of the annual payment?

7. A house and lot can be acquired by a down-payment of P500,000 and a yearly payment of P100,00 at
the end of each year for a period of 10 years, starting at the end of 5 years from the date of purchase. If
money is worth 14% compounded annually, what is the cash price of the property?