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    Annuity Yy

    Uploaded by

    Karen May Alonsagay
    Renz Castro received a credit card with an 18% interest rate and purchased an item for Php 18,635.50. The minimum monthly payment is Php 500. If Renz makes only the minimum payment, it will take him 55 months to pay off the debt. If Renz pays Php 1,750 per month, it will take him 12 months to pay off the debt. The total payment under the Php 500 plan would be Php 27,500 while the total payment under the Php 1,750 plan would be Php 20,455.75, resulting in a difference of Php 7,044.25.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Annuity Yy

    Uploaded by

    Karen May Alonsagay
    18 views5 pages
    Renz Castro received a credit card with an 18% interest rate and purchased an item for Php 18,635.50. The minimum monthly payment is Php 500. If Renz makes only the minimum payment, it will take him 55 months to pay off the debt. If Renz pays Php 1,750 per month, it will take him 12 months to pay off the debt. The total payment under the Php 500 plan would be Php 27,500 while the total payment under the Php 1,750 plan would be Php 20,455.75, resulting in a difference of Php 7,044.25.

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    © © All Rights Reserved

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    Renz Castro received a credit card with an 18% interest rate and purchased an item for Php 18,635.50. The minimum monthly payment is Php 500. If Renz makes only the minimum payment, it will take him 55 months to pay off the debt. If Renz pays Php 1,750 per month, it will take him 12 months to pay off the debt. The total payment under the Php 500 plan would be Php 27,500 while the total payment under the Php 1,750 plan would be Php 20,455.75, resulting in a difference of Php 7,044.25.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    18 views5 pages

    Annuity Yy

    Uploaded by

    Karen May Alonsagay
    Renz Castro received a credit card with an 18% interest rate and purchased an item for Php 18,635.50. The minimum monthly payment is Php 500. If Renz makes only the minimum payment, it will take him 55 months to pay off the debt. If Renz pays Php 1,750 per month, it will take him 12 months to pay off the debt. The total payment under the Php 500 plan would be Php 27,500 while the total payment under the Php 1,750 plan would be Php 20,455.75, resulting in a difference of Php 7,044.25.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Name: Karen May B.

    Alonsagay
    Course and Sec: BSBA-FM 3B
    Subject: Financial Management 1 - B

    1. You have saved Php 200,000 for a down payment on a new family vehicle. The largest monthly payment you can
    afford is Php 17,500. The loan will have a nominal rate of 12% and payments are made at the end of each month.
    What is the most expensive vehicle you can afford if you finance it for 48 months? For 60 months?

    Annuity Payment (PNT) = Php. 17,500

    Interest rate (r) = 12%

    Time in Years (t) = 4 years (a); 5 years (b)

    Compounding periods (n) = Monthly (12 times per year)

    Required; Present value (PV) of investment

    − ( t) ( n)
    r
    Formula: PVoa=PMT
    1− 1+( ) n
    r
    n

    A. 48 months/ 4-year term

    Formula:
    − ( t) ( n)
    r
    PVoa=PMT
    ( )
    1− 1+
    n
    r
    n
    − ( 4 ) ( 12 )
    0.12
    PVoa=PMT
    1− 1+
    12( )
    0.12
    12
    1−0.6202604
    PVoa=17,500
    0.01
    0.3797396
    PVoa=17,500
    0.01
    PVoa=₱ 664,544.3

    Total Amount of cash available to spend:

    = loan proceeds + down payment saved


    = 664,544.3 + 200,000

    =₱ 864,544.3

    B. Formula:
    − ( t) ( n)
    r
    PVoa=PMT
    ( )
    1− 1+
    n
    r
    n
    − ( 5 )( 12 )
    0.12
    PVoa=PMT
    1− 1+
    12 ( )
    0.12
    12
    1−0.5504496
    PVoa=17,500
    0.01
    0.4495504
    PVoa=17,500
    0.01
    PVoa=₱ 786,713.2
    Loans proceeds + Down payment saved

    = 786,713.2 + 200,000

    = ₱ 986,713.2

    Answer:

    A. 864,544.3

    B. 986,713.2
    2. Renz Castro recently received a credit card with an 18% nominal interest rate. With the card, he
    purchased PC unit for Php 18,635.50. The minimum payment on the card is only Php 500 per month.
    A. If Renz makes the minimum monthly payment and makes no other charges, how many months will it
    be before he pays off the card? Round to the nearest month.
    B. If Renz makes monthly payment of Php 1,750, how many months will it be before he pays off the
    debt? Round to the nearest month.
    C. How much in total payments will Renz make under Php 500-a-month plan than with the Php 1,750-a-
    month plan? Make sure you use three decimal places for N.

    Formula:

    ( rn )
    t=
    [
    log 1−
    PV

    PMT ]
    −12 log 1+ ( rn )
    Given:

    Present value (PV)= ₱ 18,635.50

    Annuity payment(PMT)= ₱ 500

    Interest rate (r)= 18%

    Compounding periods (n)= Monthly (12)

    ( 0.18
    a)
    t=
    [
    log 1−
    18,635.50

    500
    0.18
    12 )
    ]
    (
    −12 log 1+
    12 )
    log [ 1−0.559065 ]
    t=
    −12 log ( 0.015 )
    log [ 1−0.440935 ]
    t=
    −12 log ( 0.0064660422 )

    −0.3556254269
    t=
    −0.0775925064

    t=4.58324 years

    t=4.58324 ×12

    t ¿ 55 months

    b) Present value (PV)= ₱ 18,635.50


    Annuity payment(PMT)= ₱ 1,750
    Interest rate (r)= 18%
    Compounding periods (n)= Monthly (12)

    ( 0.18
    t=
    [
    log 1−
    18,635.50

    1,750
    0.18
    12 )
    ]
    −12 log 1+( 12 )
    log [ 1−0.1597328571 ]
    t=
    −12 log ( 0.015 )

    log [ 0.8402671429 ]
    t=
    −12 ( 0.0064660422 )

    0.07558261841
    t=
    0.0775925064

    ¿ 0.9741 years
    ¿ 0.9741 X 12
    t ¿ 12 months

    c) Number X Number = Number X Monthly = Total


    of years per year of Payments payment payment
    Plan 1 (500/month) 4.58324 X 12 = 55 X 500 = 27,500
    Plan 2 (1,750/month) 0.9741 X 12 = 11.689 X 1,750 = 20,455.75
    7,044.25
    A. 27,500
    B. 20,455.75

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