Jenny Rose S.

Adriano
Lance Derwin P. Belza
Ian Cristopher L. Codilan
Ashley G. Correa
John Christian M. Naluis
BSEE 3 – 1
ASSESSMENT 2
1. Find the accumulated amount of the ordinary annuity paying an amortization of
1000P per month at a rate of 12% compounded monthly for 5 years. (ADRIANO)
GIVEN: A = 1000P ; j = 12% → i = 1% ≈ 0.01 ; n = 5 years ≈ 60 months
REQUIRED: F =?
SOLUTION:
(1 + 𝑖)𝑛 − 1
𝐹 = 𝐴( )
𝑖

(1 + 0.01)60 − 1
𝐹 = 1000 ( )
0.01

F= 81,670 P

2. What present sum is equivalent to a series of 1000P annual end-of-year payments, if a total
of 20 payments are made and interest is 12%? (CORREA)
GIVEN: A=1000P / year ; n=20 years ; i=12% or 0.12
REQUIRED: P=?
ILLUSTRATION:
SOLUTION:
SET UP EV at 0:
Σ↑ = Σ↓
1 − (1 + 𝑖)−𝑛
𝑃 = 𝐴[ ]
𝑖
1 − (1 + 0.12)−20
𝑃 = 1000 [ ]
0.12

𝑃 = 7469.443624𝑃
𝑷 = 𝟕, 𝟒𝟔𝟗. 𝟒𝟒𝑷

3. A man made ten annual-end-of year purchases of 1000P common stock. At the end of 10th
year he sold all the stock for 12000P. What interest rate did he obtain on his investment?
(CORREA)
GIVEN: n= 10 years ; A= 1000 P ; F= 12 000
REQUIRED: i=?
SOLUTION:
(1+𝑖)10 −1
12000=1000( )
𝑖

By shift solve,
i = 0.039
i = 3.9% ≈ 4%
4. A piece of property is purchased for 10000P and yields a 1000P yearly profit. If the
property is sold after 5 years, what is the maximum price to break-even if the interest is 6%
per annum? (BELZA)
GIVEN: F = 10000P ; A = 1000P / year ; n = 5 years ; i = 6% or 0.06 per annum
REQUIRED: x=?
ILLUSTRATION:
SOLUTION:
SET-UP EV at 5:
Σ↑ = Σ↓
𝐹 + 𝑥 = 10000(1 + 0.06)5
(1 + 𝑖)𝑛 − 1
𝑤ℎ𝑒𝑟𝑒 𝐹 = 𝐴 { }
𝑖
(1 + 0.06)5 − 1
1000 { } + 𝑥 = 10000(1 + 0.06)5
0.06

5
(1 + 0.06)5 − 1
𝑥 = 10000(1 + 0.06) − 1000 { }
0.06

𝑥 = 7,745.162816𝑃
𝒙 = 𝟕, 𝟕𝟒𝟓𝑷
5. A condominium unit can be bought at a down payment of 150000P and a monthly payment
of 10000P for 10 years starting at the end of 5th year from the date of purchase. If money is
worth 12% compounded monthly, what is the cash price of the condominium unit? (NALUIS)
GIVEN: DP = 150,000P A = 10,000P ;
n = 10 years starting at the end of 5th year from the date of purchase or 121 months
0.12
i= = 0.01
12

m=5 years or 59 months

REQUIRED: P=?
ILLUSTRATION:
SOLUTION:
SET-UP EV at 0:
Σ↑ = Σ↓
1 − (1 + 𝑖)−𝑛
𝑃 = 𝐷𝑃 + 𝐴 ( ) (1 + 𝑖)−𝑚
𝑖

1 − (1 + 0.01)−121
𝑃 = 150000 + 10000 ( ) (1 + 0.01)−59
0.01

𝑃 = 539,170.752
𝑷 = 𝟓𝟑𝟗, 𝟏𝟕𝟏𝑷
6. The owner of the quarry signs a contract to sell his stone on the following basis. The
purchaser is to remove the stone from the certain portion of the pit according to a fixed
schedule of volume, price and time. The contract is to run 18 years as follows. Eight years
excavating a total of 20,000 m per year at 10P per meter, the remaining ten years, excavating
a total of 50,000 m per year at 15P per meter. On the basis of equal year-end payments during
each period by the purchaser, what is the present worth of the pit to the owner on the basis
of 15% interest? (CODILAN)
GIVEN: 𝐴1 = 200000𝑃 ; 𝑛1 = 8 𝑦𝑒𝑎𝑟𝑠 ; 𝐴2 = 750000𝑃 ; 𝑛2 = 10 𝑦𝑒𝑎𝑟𝑠 ; 𝑖 = 15%
REQUIRED: P=?
ILLUSTRATION:
SOLUTION:
1 − (1 + 0.15)−8
𝑃1 = 200000 ( ) = 897464.3015 𝑃
0.15

1 − (1 + 0.15)−8
𝑃2 = 750000 ( ) (1 + 0.15)−8 = 1230483.275 𝑃
0.15

𝑃𝑇 = 𝑃1 + 𝑃2
𝑷𝑻 = 𝟐, 𝟏𝟐𝟕, 𝟗𝟒𝟖 𝑷
7. A wealthy man donated a certain amount of money to provide scholarship grants to
deserving students. The fund will grant 10,000P per year for the first 10 years and 20,000P
per year on the years thereafter. The scholarship grants started one year after the money
was donated. How much was donated by the man if the fund earns 12% interest. (CODILAN)
GIVEN: 𝐴1 = 10000𝑃 ; 𝐴2 = 20000𝑃 ; 𝑛 = 10 𝑦𝑒𝑎𝑟𝑠 ; 𝑖 = 12%
REQUIRED: P=?
ILLUSTRATION:

SOLUTION:
(1 + 0.12)10 − 1
𝑃1 = 1000 ( ) = 56502.23028
0.12(1 + 0.12)10

𝑃2 = 20000(0.12)−1 = 166666.6667
𝑃3 = 166666(1 + 0.12)−10 = 53662.2061
𝑃𝑇 = 56502.23028 + 53662.2061
𝑷𝑻 = 𝟏𝟏𝟎, 𝟏𝟔𝟓 𝑷
8. What amount of money deposited 40 years ago at 12% interest would now provide a
perpetual payment of 10,000P per annum? (NALUIS)
GIVEN: i= 0.12 ; A= 10000P / year
REQUIRED: P=?
ILLUSTRATION:
SOLUTION:
SET-UP EV at 40: Σ↑ = Σ↓

10000
= 𝑃(1 + 0.12)40
0.12

∞
1 2 3

10000
𝑃=
0.12
(1 + 0.12)40

𝑃 = 895.5665152P

𝑷 = 𝟖𝟗𝟔𝑷
9. A company rent a building for 50,000P per month for a period of 10 years. Find the
accumulated amount of the rentals if the rental for each month is being paid at the start of
each month and money is worth 12% compounded monthly. (ADRIANO)
GIVEN: j=12% ; A=50000P ; n=10 years = 120 months
REQUIRED: F=?
SOLUTION:
𝑗 0.12
𝑖= = = 0.01
𝑛1 12
(1 + 𝑖 )𝑛+1 − 1 (1 + 0.01)120+1 − 1
𝐹 = 𝐴[ ] − 1 = 50000 [ ]−1
𝑖 0.01

𝐹 = 11,616,953.82𝑃
𝑭 = 𝟏𝟏, 𝟔𝟏𝟔, 𝟗𝟓𝟒𝑷
10. The amount of the perspective investor pay for a bond if he desires an 8% return on his
investment and the bond will return 1000P per year for 20 years and 20,000P after 20 years
is ? (ADRIANO)
GIVEN: i= 8% return on investment ; I= 1000 P ; n= 20 ; C=F=20000
REQUIRED: P=?
SOLUTION:
1 − (1 + 0.08)−20
𝑃 = 1000 ( ) + 20000(1 + 0.08)−20
0.08

P = 14109.11156P
𝑷 = 𝟏𝟒, 𝟏𝟎𝟗. 𝟏𝟏𝑷
11. A machine costs 50,000P. Find the capitalized cost if the annual maintenance and
operational cost is 5000P and money worth 15% per annum. (BELZA)
GIVEN: FC = 50,000P ; MC = 5,000P ; i = 15% ; CR = 0 ; RC = 0
REQUIRED: CC = ?
SOLUTION:
𝑀𝐶 𝐶𝑅 𝑅𝐶
𝐶𝐶 = 𝐹𝐶 + + +
𝑖 (1 + 𝑖) − 1 (1 + 𝑖)𝐿 − 1
𝑘

5,000 0 0
𝐶𝐶 = 50,000 + + +
0.15 (1 + 𝑖)𝑘 − 1 (1 + 𝑖)𝐿 − 1
𝑪𝑪 = 𝟖𝟑, 𝟑𝟑𝟑. 𝟑𝟑𝟑𝟑𝟑𝑷
12. A machine cost 50,000P. Find the capitalized cost if the annual maintenance cost is 5000P
and cost of repair is 4000P every 4 years and money worth 12% per annum. (ADRIANO)
GIVEN: FC= 50kP ; CR= 4 kP ; i= 12% ; MC= 5kP/yr ; RC=0
REQUIRED: CC=?
SOLUTION:
𝑀𝐶 𝐶𝑅 𝑅𝐶
𝐶𝐶 = 𝐹𝐶 + + +
𝑖 (1 + 𝑖) − 1 (1 + 𝑖)𝐿 − 1
𝑘

5000 4000 0
𝐶𝐶 = 50 000 + + +
0.12 (1 + .12) − 1 (1 + 𝑖 )𝐿 − 1
4

CC = 98641.14788P
𝑪𝑪 = 𝟗𝟖𝟔𝟒𝟏𝑷
13. A building cost 10 million and the salvage value is 150,000P after 25 years. The annual
maintenance cost is 60,000P costs of repair is 200,000P every 5 years. Find the capitalized
cost if money worth 15% per annum. (CODILAN)
GIVEN: FC= 10 million ; SV= 150,000P ; L= 25 years ; k=5 years
MC= 60,000P ; CR= 200,000P ; i = 15% per year
REQUIRED: CC=?
SOLUTION:

𝑅𝐶 = 𝐹𝐶 − 𝑆𝑉 − 𝐶𝑅=
10 000 000-150 000-200 000= 9 650 000
Substitute value

𝑀𝐶 𝐶𝑅 𝑅𝐶
𝐶𝐶 = 𝐹𝐶 + + +
𝑖 (1 + 𝑖) − 1 (1 + 𝑖)𝐿 − 1
𝑘

60000 200000 9650000

𝐶𝐶 = 10 000 000 + + +
0.15 (1 + 0.15)5 − 1 (1 + 0.15)25 − 1
CC = 10,900,082.29 P
𝑪𝑪 = 𝟏𝟎, 𝟗𝟎𝟎, 𝟎𝟖𝟐𝑷
14. A sales9man earns 1000P on the 1st month, 1500P on the 2nd month, 2000P on the 3rd
month and so on. Find the accumulated amount of his income at the 10th month if money
worth 12% compounded monthly. (CORREA)
GIVEN: 1𝑠𝑡 𝑚𝑜𝑛𝑡ℎ = 1000𝑃 ; 2𝑛𝑑 𝑚𝑜𝑛𝑡ℎ = 1500𝑃 ; 3𝑟𝑑 𝑚𝑜𝑛𝑡ℎ = 2000𝑃 ; 𝐺 = 500
𝑗 = 12% 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 ; 𝑛 = 10 ; 𝐴 = 1000𝑃
REQUIRED: F=?
SOLUTION:
𝑗 0.12
𝑖= = = 0.01
𝑛1 12
(1 + 0.01)10 − 1 500 (1 + 0.01)10 − 1
𝐹 = 𝐹𝑎 + 𝐹𝑔 = (1000) [ ]+( )[ − 10]
0.01 0.01 0.01

𝐹 = 33,572.84𝑃
𝑭 = 𝟑𝟑, 𝟓𝟕𝟑𝑷
15. A man wishes to accumulate a total of 500,000P at the age of 30. On his 20th birthday, he
deposited a certain amount of money at a rate of 12% per annum. If he increases his deposit
by 10% each year until the 30th birthday, how much should his initial deposit be? (NALUIS)
GIVEN: F = 500000P ; i = 12% ; n = 10 years ; r = 10%
REQUIRED: x=?
ILLUSTRATION:

SOLUTION:
1 + 𝑟 1 + 0.10
𝑤= = = 0.9821428571
1 − 𝑖 1 + 0.12
SET-UP EV at 0:
Σ↑ = Σ↓
𝑥 + 𝑃𝐺𝐺 = 500000(1 + 𝑖)−𝑛
𝐴 1 − 𝑤𝑛
𝑤ℎ𝑒𝑟𝑒: 𝑃𝐺𝐺 = { }
1+𝑖 1−𝑤
𝑥(1.1) 1 − 0.982142857110
𝑥+ { } = 500000(1 + 0.12)−10
1 + 0.12 1 − 0.9821428571

𝐵𝑦 𝑠ℎ𝑖𝑓𝑡 𝑠𝑜𝑙𝑣𝑒:
𝑥 = 15,988.91553𝑃
𝒙 = 𝟏𝟓, 𝟗𝟖𝟗𝑷
16. If 2000P is deposited in a savings account at the beginning of each of 15 years and the
account draws interest at 7% per year, compounded annually. Find the value of the account
at the end of 15 years. (CORREA)
GIVEN: A= 2000P ; n= 15 ;
7
i= 7% ; i= = i = 7% or 0.07
1

REQUIRED: F= ?
SOLUTION:

(1 + 0.07)16 − 1
𝐹 = 2000 ( − 1)
0.07

𝐹 = 53,776.1071𝑃
𝑭 = 𝟓𝟑, 𝟕𝟕𝟔𝑷
17. A man deposits 1000P every year for 10 years in a bank. He makes no deposit during the
subsequent 5 years. If the bank pays 8% interest, find the amount of the account at
the end of 15 years. (BELZA)
GIVEN: 𝐴 = 1000𝑃 ; 𝑛1 = 10 𝑦𝑒𝑎𝑟𝑠 ; 𝑛2 = 15 𝑦𝑒𝑎𝑟𝑠; 𝑚 = 5𝑦𝑒𝑎𝑟𝑠 ; 𝑖 = 8% = 0.08
REQUIRED: P=?
ILLUSTRATION:
SOLUTION:
SET-UP EV at 15:
Σ↑ = Σ↓
(1 + 𝑖)𝑛−𝑚 − 1
𝐹 = 𝐴[ ] (1 + 𝑖)𝑚
𝑖
(1 + 0.08)15−5 − 1
𝐹 = 1000 [ ] (1 + 0.08)5
0.08

𝐹 = 21, 285.51297𝑃
𝑭 = 𝟐𝟏, 𝟐𝟖𝟔𝑷
18. Twenty-five thousand pesos is deposited in a savings account that pays 5% interest,
compounded semi-annually. Equal annual withdrawals are to be made from the account,
beginning one year from now and continuing forever. Find the maximum amount of the equal
annual withdrawal. (CODILAN)
5
GIVEN: 𝑖 = 2 = 2.5% ; 𝑃 = 25000𝑃

SOLUTION:
𝐴
𝑃= ; 𝐴 = 𝑃𝑖
𝑖
𝐴 = 25000(0.025) = 625
(1 + 0.025)2 − 1
𝐹 = 625 ( )
0.025

𝑭 = 𝟏𝟐𝟔𝟓. 𝟔𝟐𝟓 𝑷 per year

19. What amount of money deposited 50 years ago at 8% interest would now provide a
perpetual payment of 10000P per year? (BELZA)
GIVEN: A= 10000P ; i = 8% or 0.08 per year ; n = 50
REQUIRED: P =? (50 years ago)
ILLUSTRATION:

50
∞
1 2 3

SOLUTION:
SET-UP EV at 50:
Σ↑ = Σ↓
𝐴
= 𝑃(1 + 0.08)50
𝑖
10000
= 𝑃(1.08)50
0.08
𝑃 = 2665. 153569𝑃
𝑷 = 𝟐, 𝟔𝟔𝟓. 𝟏𝟓𝑷

20. A man buys a motor cycle. There will be no maintenance cost the first year as the motor
cycle is sold with one year free maintenance. The 2nd year the maintenance is estimated at
2000P. In subsequent years the maintenance cost will increase by 2000P per year. How
much would need to be set aside now at 5% interest to pay the maintenance costs of the
motor cycle for the first 6 years of ownership? (NALUIS)
GIVEN: A = 0P ; i = 5% or 0.05 ; n = 6 ; G = 2000
REQUIRED: P = PG = ?
ILLUSTRATION:

1 2 3 4 5 6

0k
2k

4k
6k

8k
10k
SOLUTION:
𝐺 1 − (1 + 𝑖)−𝑛
𝑃 = 𝑃𝐺 = { − 𝑛(1 + 𝑖)−𝑛 }
𝑖 𝑖
2000 1 − (1 + 0.05)−6
𝑃 = 𝑃𝐺 = { − 6(1 + 0.05)−6 }
0.05 0.05

𝑃 = 23,935.9875𝑃
𝑷 = 𝟐𝟑, 𝟗𝟑𝟔𝑷