Garcia, Carlos Miguel R.

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“I, the undersigned, strive to uphold the values on honor and excellence. I pledge upon my
honor that no form of intellectual dishonesty was committed in this homework. I
understand that committing such offense, my homework will not be checked, and its
score will be zero.”

Garcia, Carlos Miguel R.

1. Compute the effective annual interest rate for this loan
i n
I eff =(1+ ) −1
n
0.06105 12
I eff =(1+ ) −1
12
I eff =0.06278705588
I eff =6.279 %

2. Compute the annual percentage rate (APR) for this loan

I eff
=i APR
m
0.00627
=i APR
12
0.0052325=i APR
(1+i APR)m −1= APR
(1+0.0052325)12−1= APR
APR=0.0646289693
APR=6.463 %
3. Explain in not more than 10 sentences the Rule of 78th. Cite your sources.

The rule of 78th comes from the summation of the numbers 1 through 12 which is the number of months
in a year. This method can apply to any number of month as long as the number of months are added. An
example can be 24 months and the summation of 1 through 24 is 300. The computation of that can be
(((n(n+1))/2) where n is the number of months there will be.

https://financial-calculators.com/rule-of-78s
https://www.hkbea.com/pdf/en/Rule_of_78.pdf?
fbclid=IwAR1bZEPXSqmi8YcRLTSso1smGwyUyL6E1hpuPkJN4O5FDHueTBIV0JlWMqY

4. Show how you would derive the rebate factor (0.6589)

5. Verify the payoff amount by using the Rule of 78th formula.

1 = PHP 74 471.90 x 42/903 = 3463.81

2 = PHP 74 471.90 x 41/903 = 3381.34
3 = PHP 74 471.90 x 40/903 = 3298.87
4 = PHP 74 471.90 x 39/903 = 3216.39
5 = PHP 74 471.90 x 38/903 = 3133.92
6 = PHP 74 471.90 x 37/903 = 3051.45
7 = PHP 74 471.90 x 36/903 = 2968.98
8 = PHP 74 471.90 x 35/903 = 2886.51
9 = PHP 74 471.90 x 34/903 = 2804.04
10 = PHP 74 471.90 x 33/903 = 2721.56
11 = PHP 74 471.90 x 32/903 = 2639.09
Garcia, Carlos Miguel R.

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12 = PHP 74 471.90 x 31/903 = 2556.62

13 = PHP 74 471.90 x 30/903 = 2474.15
14 = PHP 74 471.90 x 29/903 = 2391.68
15 = PHP 74 471.90 x 28/903 = 2309.21
16 = PHP 74 471.90 x 27/903 = 2226.73
17 = PHP 74 471.90 x 26/903 = 2144.26
18 = PHP 74 471.90 x 25/903 = 2061.79
19 = PHP 74 471.90 x 24/903 = 1979.32
20 = PHP 74 471.90 x 23/903 = 1896.85
21 = PHP 74 471.90 x 22/903 = 1814.38
22 = PHP 74 471.90 x 21/903 = 1731.90
23 = PHP 74 471.90 x 20/903 = 1649.43
24 = PHP 74 471.90 x 19/903 = 1566.96
25 = PHP 74 471.90 x 18/903 = 1484.49
26 = PHP 74 471.90 x 17/903 = 1402.02
27 = PHP 74 471.90 x 16/903 = 1319.55
28 = PHP 74 471.90 x 15/903 = 1237.07
29 = PHP 74 471.90 x 14/903 = 1154.60
30 = PHP 74 471.90 x 13/903 = 1072.13
31 = PHP 74 471.90 x 12/903 = 989.66
32 = PHP 74 471.90 x 11/903 = 907.19
33 = PHP 74 471.90 x 10/903 = 824.72
34 = PHP 74 471.90 x 9/903 = 742.24
35 = PHP 74 471.90 x 8/903 = 659.77
36 = PHP 74 471.90 x 7/903 = 577.30
37 = PHP 74 471.90 x 6/903 = 494.83
38 = PHP 74 471.90 x 5/903 = 412.36
39 = PHP 74 471.90 x 4/903 = 329.87
40 = PHP 74 471.90 x 3/903 = 247.41
41 = PHP 74 471.90 x 2/903 = 164.94
42 = PHP 74 471.90 x 1/903 = 82.47

Instalment Number Payment Amount Principal Interest

1 10113.95 6650.14 3463.81
2 10113.95 6732.61 3381.34
3 10113.95 6815.08 3298.87
4 10113.95 6897.56 3216.39
5 10113.95 6980.03 3133.92
6 10113.95 7062.50 3051.45
7 10113.95 7144.97 2968.98
8 10113.95 7227.44 2886.51
9 10113.95 7309.91 2804.04
10 10113.95 7392.39 2721.56
11 10113.95 7474.86 2639.09
12 10113.95 7557.33 2556.62
13 10113.95 7639.80 2474.15
14 10113.95 7722.27 2391.68
15 10113.95 7804.74 2309.21
16 10113.95 7887.22 2226.73
17 10113.95 7969.69 2144.26
Garcia, Carlos Miguel R.

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18 10113.95 8052.16 2061.79

19 10113.95 8134.63 1979.32
20 10113.95 8217.10 1896.85
21 10113.95 8299.57 1814.38
22 10113.95 8382.05 1731.90
23 10113.95 8464.52 1649.43
24 10113.95 8546.99 1566.96
25 10113.95 8629.46 1484.49
26 10113.95 8711.93 1402.02
27 10113.95 8794.40 1319.55
28 10113.95 8876.88 1237.07
29 10113.95 8959.35 1154.60
30 10113.95 9041.82 1072.13
31 10113.95 9124.29 989.66
32 10113.95 9206.76 907.19
33 10113.95 9289.23 824.72
34 10113.95 9371.71 742.24
35 10113.95 9454.18 659.77
36 10113.95 9536.65 577.30
37 10113.95 9619.12 494.83
38 10113.95 9701.59 412.36
39 10113.95 9784.08 329.87
40 10113.95 9866.54 247.41
41 10113.95 9949.01 164.94
42 10113.95 10031.48 82.47
Total 424785.9 350314 74471.86

k (k +1)
u= F
n(n+1)
35 (35+1)
u= ( 84829.64)
42(42+1)
u=59183.47
Payoff amount= ( k +1 ) R−u
Payoff amount= (35+ 1 ) (10113.95)−59183.47
Payoff amount=304918.73

6. Compute the payoff amount using the interest factor (annuity formula)
n
i g = 1+ i m −1
( ) n
12
i g = 1+ 0.06105 12 −1
( 12 )
i g = 0.0050875
i g = 0.50875 %
1−( 1+i g )−mt
P = A[ ]
ig
Garcia, Carlos Miguel R.

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1−( 1+0.0050875 )−12 (3.5)

348539 = A[ ]
0.0050875
A=9237.71