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BES4-Assignment 3

This document contains the solutions to several math problems involving compound interest rates. The first problem calculates the additional payment needed to discharge a loan given multiple payments over time at 5% annual interest. The second problem determines how long it will take an initial $500 investment to grow to $2000 at a 7% semi-annual interest rate. The third problem calculates the amount a man will have after placing 50% of his $300,000 lottery winnings in a trust fund earning 14% quarterly interest over 10 years.

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670 views2 pages

BES4-Assignment 3

This document contains the solutions to several math problems involving compound interest rates. The first problem calculates the additional payment needed to discharge a loan given multiple payments over time at 5% annual interest. The second problem determines how long it will take an initial $500 investment to grow to $2000 at a 7% semi-annual interest rate. The third problem calculates the amount a man will have after placing 50% of his $300,000 lottery winnings in a trust fund earning 14% quarterly interest over 10 years.

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NAME: NAJIVE SHIEK ASSIGNMENT 3

COURSE & SEC: BSCE – 2A BES4


PROFESSOR: ENGR. OTILIA TADUYO OCTOBER 7, 2021
Assignment 3 BSCE 2A 07 October 2021
P3-08 (ECE Board, September 1983)
Mr. W borrowed P2, 000 from Mr. Y on June 1, 1928 and P500 on June 1, 1930. Mr. W
paid P500 on June 1, 1931, P400 on June 1, 1932, and P700 on June 1, 1933. If money
is worth 5% compounded annually, what additional payment should Mr. W pay on June
1, 1936 to discharge all remaining liability?
𝑆𝑜𝑙𝑢𝑡𝑖𝑜𝑛:
𝐼𝑛𝑓𝑙𝑜𝑤 = 𝑜𝑢𝑡𝑓𝑙𝑜𝑤
𝑃2,000(𝐹/𝑃, 𝑖%, ) + 𝑃500(𝐹/𝑃, 𝑖%, 𝑛) = 𝑃500(𝐹/𝑃, 𝑖%, 𝑛) + 𝑃400(𝐹/𝑃, 𝑖%, 𝑛
+𝑃700(𝐹/𝑃, 𝑖%, 𝑛) + 𝑥
𝑃2,000(1 + 5%)8 + 𝑃500(1 + 5%)6 = 𝑃500(1 + 5%)5 + 𝑃400(1 + 5%)4
+𝑃700(1 + 5%³ + 𝑥
𝑋 = 𝑃1,690.28
P3-09 (M.E. Board, September 1979)
How long will it take P500 to be four times in value if invested at the rate of 7%
compounded semi-annually? What is the effective rate of interest?
𝑮𝒊𝒗𝒆𝒏: 𝑃 = 𝑃500 𝐴 = 𝑃500(4) = 𝑃2000 𝑖 = 7% = 0.07 𝑛=2 𝑡= ?
𝑺𝒐𝒍𝒖𝒕𝒊𝒐𝒏: (𝑺𝒐𝒍𝒗𝒊𝒏𝒈 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒀𝒆𝒂𝒓𝒔(𝒕)) 𝑺𝒐𝒍𝒗𝒊𝒏𝒈 𝒇𝒐𝒓 𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝑹𝒂𝒕𝒆 𝒐𝒇 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
𝑖 𝑟
𝐴 = 𝑃(1 + )𝑛𝑡 𝑖 = (1 + )𝑛 − 1
𝑛 𝑛
0.07 2𝑡
2000 500(1 + 2 ) 0.07 2
= 𝑖 = (1 + ) −1
500 500 2
4 = (1.035)2𝑡 𝑖 = 0.071225(100)
log 4 2t log(1.035)
= 𝑖 = 7.1225%
2 log(1.035) 2 log(1.035)
log 4
𝑡= = 20.15 𝑦𝑒𝑎𝑟𝑠
2 log(1.035)
P3-14 (M.E. Board, June 1990)
A man who won P300, 000 in a lottery decided to place 50% of his winnings in a trust
fund for the college education of his son. If the money will earn 14% a year
compounded quarterly, how much will the man have at the end of 10 years, when his
son will be starting his college education?
𝐺𝑖𝑣𝑒𝑛:
𝑃 = 300,00
50% 𝑋 300,000 = 150,000
𝑖 = 14%
𝑚 = 4
𝐹 = 150,000 (1 + 1420)10 = 𝑃593,888.96

P3-15 (Geodetic Engineering Board, August 1980 & February 1982)


A man borrowed P25, 000 from a bank for which he signed a promissory note to repay
the loan at the end of one year. He only received the amount of P21, 915 after the bank
collected the advance interest and an additional amount of P85.00 for legal fees. What
was the rate of interest that the bank charged?
𝐺𝑖𝑣𝑒𝑛:
𝐹 = 25,000
𝑃 = 21,915
𝑖 =?
𝐷 = 25,000 − 21,915 = 3,085
𝐷 = 3,085 − 85(𝑙𝑒𝑔𝑎𝑙 𝑓𝑒𝑒𝑠)
𝐷 = 3,000
3,000
𝑖 = = 0.1369 𝑜𝑟 13.69%
21915

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