Problem No.

1:
Mr. Dela Cruz plans to deposit a P1,000 at the end of each month for 5 years at
12% interest compounded bi-monthly. What will be the amount available in
three years? Use ordinary annuity
Given:
A=₱1,000
in=12% ; m=6
n=Nm=3(12)=36

Req’d: F3

Sol’n:

(1 + 𝑖) − 1
𝐹=𝐴
𝑖

Where; 𝑖 = =

Equate 𝑖 and 𝑖 and use the effective rate equation;

𝑖 =𝑖

𝑖
𝑤ℎ𝑒𝑟𝑒; 𝑖 = 1 + −1
𝑚
 𝑖 𝑖
𝑖 = 1+ −1= 1+ −1
12 6

𝑖 0.12
1+ −1= 1+ −1
12 6

𝑖 0.12
1+ −1= 1+ −1
12 6

𝑖 0.12
1+ = 1+
12 6

𝑖 0.12
1+ = 1+
12 6

0.12
𝑖 = 12 1+ −1
6

𝑖 = 0.1194

0.1194 ( )
1+ −1
𝐹 = ₱1,000 12
0.1194
12

𝑭𝟑 = ₱𝟒𝟑, 𝟎𝟑𝟕. 𝟑𝟎
Problem No.2:
An engineer borrowed P50,000 from Social Security System, in the form of
calamity loan, with interest at 8% compounded quarterly payable in equal
quarterly installments for ten years starting at the end of the first period. Find
the quarterly payments.

Given:
P=₱50,000
in=8% ; m=4
n=Nm=10(4)=40

Req’d: A

Sol’n:

1 − (1 + 𝑖)
𝑃=𝐴
𝑖

1 − (1 + 𝑖)
𝐴=𝑃
𝑖

.
Where; 𝑖 = = = = 0.02

1 − (1 + 0.02)
𝐴 = ₱50,000
0.02

𝑷 = ₱𝟏, 𝟖𝟐𝟕. 𝟕𝟗
Problem No.3:
If you obtain a loan of P800,000 at the rate of 10% compounded annually in
order to build a house, how much must you pay monthly to amortize the loan
within a period of ten years starting at the end of the first month?
Given:
P=₱800,000
in=10% ; m=1
n=Nm=10(12)=120

Req’d: A

Sol’n:

1 − (1 + 𝑖)
𝑃=𝐴
𝑖

1 − (1 + 𝑖)
𝐴=𝑃
𝑖

Where; 𝑖 = =

𝑖 = (1 + 𝑖) − 1

𝑖 =𝑖
 0.10 𝑖
1+ −1= 1+ −1
1 12

𝑖
(1 + 0.10) − 1 = 1 + −1
12

𝑖
1.10 = 1 +
12

𝑖 = 12 (1.10) −1

𝑖 = 0.0957

𝑖
1− 1+
𝐴=𝑃 𝑚
𝑖
𝑚

0.0957
1− 1+
𝐴 = ₱800,000 12
0.0957
12

𝑨 = ₱𝟏𝟎, 𝟑𝟖𝟐. 𝟒𝟗
Problem No.4:
A man invests ₱10,000 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?

Given:
P=₱10,000
i=ie=14%
n=5
M=15

Req’d: A

Sol’n:

1 − (1 + 𝑖)
𝑃=𝐴 (1 + 𝑖)
𝑖

𝑖 1
𝐴=𝑃
1 − (1 + 𝑖) (1 + 𝑖)

Where; 𝑖 = 0.14 𝑛 = 5 and 𝑀 = 15

0.14 1
𝐴 = 10,000
1 − (1.14) (1.14)

𝑨 = 𝑷𝟐𝟎, 𝟕𝟗𝟏. 𝟔𝟒
Problem No.5:
A person buys a piece of property for P100,000 down payment and ten deferred
semi-annual payments of P8,000 each starting three years from now. What is
the present value of the investment if the rate of interest is 12% compounded
semi-annually?
Given:
DP=₱100,000
A=₱8,000
i=in=12% ; m=2
n=10
M=5

Req’d: P

Sol’n:

1 − (1 + 𝑖)
𝑃 = 𝐷𝑃 + 𝐴 (1 + 𝑖)
𝑖

.
Where; 𝑖= = 0.06 𝑛 = 10 and 𝑀 = 5

1 − (1.06)
𝑃 = 100,000 + 8,000 (1.06)
0.06

𝑷 = 𝑷𝟏𝟒𝟑, 𝟗𝟗𝟗. 𝟎𝟖
Problem No.6:
A parent on the day the child is born wishes to determine what lump sum would
have to be paid into an account bearing interest at 5% compounded annually in
order to withdraw P20,000 each on the child’s 18th, 19th,20th and 21st birthdays.
How much is the lump sum amount?

Given:
A=₱20,000
i=5%
n=4
M=17

Req’d: P

Sol’n:

1 − (1 + 𝑖)
𝑃=𝐴 (1 + 𝑖)
𝑖

Where; 𝑖 = 0.05 𝑛 = 4 and 𝑀 = 17

1 − (1.05)
𝑃 = 20,000 (1.05)
0.05

𝑷 = 𝑷𝟑𝟎, 𝟗𝟒𝟏. 𝟕𝟑