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GEME 411 Assignment Moses

1. The lecturer will have to pay monthly installments of P 6,501.14 to the bank over 8 years at an interest rate of 12% compounded monthly. 2. The present value of a loan paying P5,000 monthly over 4 years at an interest rate of 3.5% compounded monthly is P223,653.42. 3. If an accountant deposits P96,000 with annual interest of 12%, the future sum after 10 years will be P1,684,678.57.

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GAONE MOLWANTWA
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55 views6 pages

GEME 411 Assignment Moses

1. The lecturer will have to pay monthly installments of P 6,501.14 to the bank over 8 years at an interest rate of 12% compounded monthly. 2. The present value of a loan paying P5,000 monthly over 4 years at an interest rate of 3.5% compounded monthly is P223,653.42. 3. If an accountant deposits P96,000 with annual interest of 12%, the future sum after 10 years will be P1,684,678.57.

Uploaded by

GAONE MOLWANTWA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION 1

It is an equal payment series capital recovery amount


Given: t = 8 years, r = 12%, m= 12 periods per year, P= P 400 000.00

r
N=mt i=
m

12
¿ 12× 8=
12

¿ 96 time periods=1 % which is (0.01)

To find the monthly payment;

i ( 1+i )N
A=P
[ ( 1+i )N −1 ]
0.01 ( 1+ 0.01 )96
¿ 400 000 ×
[ ( 1+0.01 )96−1 ]
0.01 ( 1.01 )96
¿ 400 000
[ ( 1.01 )96−1 ]
¿ P 6 501.14

The lecturer will have to pay monthly installments of P 6 501.14 to the bank.
QUESTION 2
Using concept of equal payment series present amount
Given: t = 4 years, r = 3.5%, m= 12 periods per year, A= P 5000.00

r
N=mt i=
m

3.5
¿ 12× 4= %
12

¿ 48 time periods=0.0029167

To find the present worth of present worth of equal payment;

[ ( 1+i )N −1 ]
P= A
i ( 1+i )N

¿ 5 000 ×
[ ( 1+0.0029167 )48−1 ]
0.0029167 ( 1+ 0.0029167 )48

¿ P 223653.42

The present value of the loan to the consumer is P 223 653.42


QUESTION 3

Apply the concept of equal payment series compound amount


Given: t = 10 years, r = 12%, m= 1 periods per year, A= P 96 000.00 

Then N = t = 10 time periods, i = r= 12% = 0.12

[ (1+i ) N −1 ]
F= A
i

¿ 96 000 ×
[ ( 1+0.12 )10−1 ]
0.12

¿ P 1684 678.57

The accountant will have a future sum of P 1684 678.57 at the end of 10 years after the last
deposit.

QUESTION 4
Option 1: Present value is P 2 500 000.00
Option 2: Present value of an annuity
Given: m =1, N= t = 25 years, PMT= P180 000.00, r = i= 6% = 0.06

PV =PMT
[ 1−( 1+i )N ]
i

¿ 180 000 ×
[ 1−( 1+.06 )−25 ]
0.06
¿ P 2301 004.11
He must choose the option 1 which is to take the lump sum now because it has a higher present
value.
QUESTION 5
Apply the concept of equal payment series sinking fund
Given: t = 1 year, r = 8%, m= 12 periods per year,  

r 15
N=mt i=
m
F=80 000−
100 (
× 80 000 )
8
¿ 12× 1= % = P 68 000.00
12

¿ 12 time periods=0.006667

i
A=F
[ (1+i ) N −1 ]
0.006667
¿ 68 000 ×
[ ( 1+ 0.006667 )12−1 ]
¿ P 5 461.87

He must pay monthly payments of P 5 461.87to realize the remaining amount after the down
payment
QUESTION 6
Apply the principle of equal payment series capital recovery amount
Given: t = 20 years, r = 10%, m= 4 periods per year,  

r
N=mt i= P=1000 000−150 000
m

10
¿ 4 ×20= % = P 850 000.00
2.5

¿ 80 time periods=0.025

i ( 1+i )N
A=P
[ ( 1+i )N −1 ]
0.025 ( 1+ 0.025 )80
¿ 850 000 ×
[ ( 1+0.025 )80−1 ]
¿ P 24 672.14

The quarterly mortgage payment is P 24 672.14

QUESTION 7
Using the concept of equal payment series sinking fund
Given: N=t = 8 years, i= r = 7% = 0.07, m= 1 period per year

The amount that has to be paid for tuition over four years; P=50 000 × 4=P 200 000.00

i
A=F
[ (1+i ) N −1 ]
0.07
¿ 200 000 ×
[ ( 1+ 0.07 )8−1 ]
¿ P 19 493.55

The cattle farmer has to pay P 19 493.55 every year to reach the P200 000.00 that will be paid
over 4 years for his daughter’s university tuition

QUESTION 8
It is an equal payment series capital recovery amount
Given: t = 20 years, r = 15%, m= 2 periods per year, P= P 2 000 000.00

r
N=mt i=
m

15
¿ 20 ×2=
2

¿ 40 time periods=7.5 % which is (0.075)

To find the yearly payment;

i ( 1+i )N
A=P
[ ( 1+i )N −1 ]
0.075 ( 1+0.075 )40
¿ 2 000 000×
[ ( 1+ 0.075 )40−1 ]
¿ P 158800.63

The company has to pay P 158 800.63 the bank every year over a 20-year period.

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