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# 1. A man made three separate loans in a lending institution.

These are:
a. P10.000 at 5% simple interest to be paid at the end of 5 years
b. P25,000 discounted by 8% to be paid at the end of 3 years.
c. P15,000 at 6% per year compounded annually to be paid by
two equal amounts; one at the end of the 4th year and the
other at the end of the 8th year.
On the third year, unable to finance the repayment, he asked the
manager into letting him pay all his loans by uniform installments
every three months, starting at the end of the first three months, for 5
years. The manager agreed but at 10 compounded monthly. What was
the amount of his uniform repayments.
2. On the day his grandson was born, a man deposited to a trust
company a sufficient amount of money so that the boy could receive
ten semiannual payments of P20,000 each for his college tuition fees,
starting with his 17th birthday.
Interest at the rate of 12%
compounded semiannually was to be paid on all amounts on deposit.
There was also a provision that the grand son could elect to withdraw
no semiannual payments and receive a single lump sum amount on his
25th birthday. The grandson chose this option.
a. How much did the boy receive as the single payment?
b. How much did the grandfather deposit?
3. A woman arranges to repay a P100,000 bank loan into 10 equal
annual payments at a 16% effective annual interest rate. Due to
financial problems, she was able to make three payments only. At
end of the 5th year, the bank restructure her loan and she agreed to
pay the balance by making monthly amortization for five years, the
first payment to be made at the end of the following month, also at
16%. Determine the monthly amortization (repayments).
4. An individual is borrowing 100,000 at 8% interest compounded
annually. The loan is to be repaid in equal annual payments over 30
years. However, just after the eighth payment is made, the lender
allows the borrower to triple the annual payments. The borrower
agrees to this increased payment. If the lender is still charging 8% per
year, compounded annually, on the unpaid balance of the loan, what is
the balance still owed just after the twelfth payment is made?
5. John borrowed a certain amount on June 1990 from Paul. Two years
later John borrowed again from Paul an amount of P5, 000. John
paid P1, 000 on June 1993 and P3,000 on June 1995. He discharged
his remaining balance by paying P7, 500 on June 1998. What was the
amount borrowed by John on June 1990 if the interest rat is 8%
compounded quarterly? (20 pts)

6. Determine the ordinary and exact simple interest on P5,000 loan for
the period form January 15, 2007 to October 12, 2008, if the rate of
interest is 8% per year. (10 pts)
7. A businessman needs P50,000 for his operations.
One financial
institution is willing to lend him the money for one year at 12.5%
interest per annum (discounted). Another lender is charging 14%,
with the principal and interest payable at the end of one year. A third
financier is willing to lend him P50,000 payable in 12 equal monthly
installments of P4,600. Which offer is best for him?
8. A certain savings-and-loan association advertises that it pays 8%
nominal interest compounded monthly.
a. If you deposit P5,000 now and plan to withdraw it in three years,
how much would your account be worth at that time?
b. If instead you decide to deposit P800 every year for three years,
how much could be withdrawn at the end of the third year?
c. Suppose that, instead, you deposit P400 every six months for
three years. What would the accumulated amount be?
9.

## An engineer wishes to set up a special fund by making uniform

semiannual end-of-period deposits for 20 years. The fund is to provide
P100,000 at the end of each of the last five years of the 20-year
period. If the interest is 8% compounded semiannually, what is the
required semiannual deposit to be made?
10.
A man inherited a regular endowment of P100, 000 every end of
3 months for 10 years. However, he may choose to get a single lump
sum payment at the end of 4 years. How much is this lump sum if the
cost of money is 14% compounded quarterly?
11.
A parent on the day his 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
childs 18th, 19th, 20th, and 21st birthdays. How much is the lump sum
amount?
12.
A price tag of P1, 200 is payable in 60 days but if paid within 30
days it will have a 3% discount. Find the rate of interest.
13.
Determine the ordinary and exact simple interest on P5,000 for
the period form January 15, 2007 to October 12, 2008, if the rate of
interest is 8%.
14.
Suppose that you borrow P1,000 from a credit company with the
agreement to repay it over a 5-year period. Their stated interest rate is 9%
per year. They show you the following items in determining the monthly
payment:
Principal --------------------------------------------P1,000
Total interest:0.09(5 years)(P1,000) ------------- 450

They ask you to pay 20% of the interest immediately, so you leave with
P1,000-90 = 910 in your pocket. Your monthly payment is calculated as
follows:
1,000 + 450 = P24.17/month
60
a. Draw a cash flow diagram of this transaction.
b. Determine the effective annual interest rate.