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    Malinao - 6-7 - ACTIVITY - SEPT 21-OCT 2 PDF

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    Jeson Malinao
    CAE Corporation borrowed P 20,000 from a bank at 12% interest compounded annually. Using the compound interest formula: 1) After 3 years the interest earned was P 8,098.56 2) The future value of the principal after 6 months was P 21,200 3) The future value of the principal after 10 years with quarterly compounding was P 65,241.

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    Malinao - 6-7 - ACTIVITY - SEPT 21-OCT 2 PDF

    Uploaded by

    Jeson Malinao
    26 views3 pages
    CAE Corporation borrowed P 20,000 from a bank at 12% interest compounded annually. Using the compound interest formula: 1) After 3 years the interest earned was P 8,098.56 2) The future value of the principal after 6 months was P 21,200 3) The future value of the principal after 10 years with quarterly compounding was P 65,241.

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    Malinao_6-7_ACTIVITY_SEPT 21-OCT 2.pdf

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    CAE Corporation borrowed P 20,000 from a bank at 12% interest compounded annually. Using the compound interest formula: 1) After 3 years the interest earned was P 8,098.56 2) The future value of the principal after 6 months was P 21,200 3) The future value of the principal after 10 years with quarterly compounding was P 65,241.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    26 views3 pages

    Malinao - 6-7 - ACTIVITY - SEPT 21-OCT 2 PDF

    Uploaded by

    Jeson Malinao
    CAE Corporation borrowed P 20,000 from a bank at 12% interest compounded annually. Using the compound interest formula: 1) After 3 years the interest earned was P 8,098.56 2) The future value of the principal after 6 months was P 21,200 3) The future value of the principal after 10 years with quarterly compounding was P 65,241.

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    © All Rights Reserved
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    You are on page 1of 3

    DO-IT-YOURSELF:

    CAE Corporation borrowed P 20,000 in a bank at 12% interest. Using simple


    interest method,
    1. How much is the interest after 3 years?
    Interest (I)= Principal(P)x Rate(r)x Time(T)= 20,000*.12*3
    Interest (I)= 7,200

    2. What is the FV of the principal after 8 years?


    Future Value = Principal +Interest
    FV= 20,000 + 20,000*.12*8
    FV= 20,000 + 19, 200
    FV= 39,200

    CAE Corporation borrowed P 20,000 in a bank compounded annually at


    12% interest. Using compound interest method,
    1. How much is the interest after 3 years?

    Time Amount Compound Future Value


    interest
    1 20,000 2,400 22,400
    2 22,400 2,688 25,088
    3 25,088 3010.56 28,098.56
    8098.56

    2. What is the FV of the principal after 6 months?

    FV= PV + Interest
    FV= 20,000 + (2400/2)
    FV= 21,200

    3. What is the FV of the principal after 10 years if it is compounded quarterly?


    4.
    FV= PV(1+i/m) m*n
    FV= 20,000 (1*.12/4) 4*10
    FV= 65,241
    SUMMARY EXERCISES:

    1. If you invest P 12,000 today, how much will you have


    a. in 6 years at 7 percent (ordinary interest)
    I= P*R*T
    I= 12,000*.07*6
    I= 5,040

    FV= 12,000 + 5,040


    FV=17,040

    b. In 15 years at 12 percent (compounded annually)

    FV= PV (1.12)^15
    FV= 68,682.79

    c. In 25 years at 10 percent (compounded semi-annually)


    FV= PV (1+ i/m) nm
    FV= 12,000(1+ .O5)^50
    FV= 137,608.80

    2. If a bank pays 12 percent nominal interest rate, what is the effective interest rate
    assuming quarterly compounding?

    APR= (1 +i/m) m – 1
    = [(1+.12/4)^4]- 1
    = 1.1255 -1
    = 0.1255 or 12.55%
    EXERCISE;
    The Billy Playhouse wants P 10,000 at the end of each year for the next 6 years. How
    much must be deposited today at 10% to yield this annuity?

    P = R[1-(1+r)^n/r]
    P = 10,000[1-(1+.10)^6/10]
    P = 56,447.39

    What amount must be deposited now in order to withdraw P 2,000 at the beginning of
    each year for 5 years if the interest rate is 12% compounded annually?

    PVIFAin = 1 – _1_(1+i)
    (1+i)n
    i
    = 1 – 1( 1+ .12)
    (1.12)*5
    .12
    PVIFAin = 4.0373

    PVAD = 2000(4.0373)
    = 8.074.60

    ABC Company wants to deposit an amount of money that will allow it to withdraw P
    2,000 indefinitely at the end of each year without decreasing the amount of the original
    deposit. If the bank guarantees to pay the firm 5 percent interest , the amount to be
    deposited NOW is?

    PV of Perpetuity = 2000
    0.05
    = 40,000

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