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Chapter 3.2 - Understanding Money and Its Management Solutions

This document contains 6 sample problems related to understanding money and its management. The problems cover topics such as calculating future values of investments with regular deposits and interest compounding annually or semi-annually, determining deposit amounts needed to reach a certain withdrawal value in the future, and calculating present values of annuities and perpetuities with different time periods and interest rates. The document provides formulas and works through examples of solving each type of problem.

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Arin Park
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186 views7 pages

Chapter 3.2 - Understanding Money and Its Management Solutions

This document contains 6 sample problems related to understanding money and its management. The problems cover topics such as calculating future values of investments with regular deposits and interest compounding annually or semi-annually, determining deposit amounts needed to reach a certain withdrawal value in the future, and calculating present values of annuities and perpetuities with different time periods and interest rates. The document provides formulas and works through examples of solving each type of problem.

Uploaded by

Arin Park
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Understanding Money

and its Management


Julius D. Obnamia, CIE, AAE
Sample Problem 1
 Suppose you make 15 equal annual deposits of Php1,000 each
into a bank account paying 5% interest per year. The first deposit
will be made one year from today. How much money can be
withdrawn from this bank account immediately after the 15th
deposit?
Sample Problem 2
 How much money would you have to deposit for 5 consecutive
years starting one year from now if you want to be able to
withdraw Php50,000 ten years from now? Assume the interest is
14% compounded annually
Sample Problem 3
 A man invests Php10,000 now for the college education of
his 2-year old son. If the fund earns 14% effective, how
much will the son get each year starting from his 18th to
the 22nd birthday
Sample Problem 4
 At the end of each year, Php5,000 is deposited in a fund
which earns 6% compounded semi-annually. How much
will be in the fund at the end of 20 years?

1+𝑖 𝑛−1
𝐹=𝐴
𝑖

0.06 20(2)
1+ 2 −1
𝐹 = 5,000
0.06
2

𝐹 = 377,006.30
Sample Problem 5
 If money is worth 8% compounded quarterly, compare the present values of
the following:
a. the annuity of Php1,000 payable quarterly for 50 years;
b. an annuity of Php1,000 payable quarterly for 100 years;
c. a perpetuity of Php1,000 payable quarterly.
Sample Problem 6
 To maintain a bridge, Php5,000 will be required at the end of 3
years and annually thereafter. If money is worth 8%, determine
the capitalized cost of all future maintenance

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