Extra Exercises

Exercise
Determine the amount of deposit made three years ago ($X).
 Solution
F-3= 200(F/P,6%,1) + X
= 200(1.06) +X
= 212+X
F-3 becomes p-3

F= P (F/P ,I , n)
F-2= (212+X)(F/P,8%,1)+0
= (212+X)(1.08)
= 228.96 +1.08X
 Solution
F-2= 228.96 +1.08X

F-1= (228.96 +1.08X)(F/P,12%,1) +300

=1.2096x +556.4
F-2=P-2

F0= (1.2096x +556.4)(F/P,15%,1)

= 1.39X +639.8
 Solution
F0= (1.2096x +556.4)(F/P,15%,1)
= 1.39X +639.8

BUT F0 =1000, F0=1.39X +639.8

Equate to get value of x, SO:

1.39X +639.8=1000
X=259
 Exercise
Principle portion vs Interest portion
Based on the following information, fill the table and answer the following question:
• Loan principal =$15,000
• Interest rate =10% per year
• Duration of loan = 3 years

What percentage of the principle portion was paid by the end of year three?

Year A Interest Portion Principal Portion Remaining

Balance
0 15,000

3 ???
 Exercise
Principle portion vs Interest portion

Loan principal =$15,000

Interest rate =10% per year
Duration of loan = 3 years
A= P(A/P,10,3)=15,000(0.4021)=$ 6,032

Year A Interest Portion Principal Portion Remaining

Balance
0 15000

1 6,032

2 6,032

3 6,032
 Exercise
Principle portion vs Interest portion

Loan principal =$15,000

Interest rate =10% per year
Duration of loan = 3 years
Interest at EOY 1=15000 x 10%=$ 1,500

Year A Interest Portion Principal Portion Remaining Balance

0 15000

1 6,032 1500 = 6,032- 1500=4532 =15000-4532= 10,468

2 6,032 =10,468*10%=1046.8 =6,032- 1046.8=4985.2 =10,468- 4985.2=5,482.8

3 6,032 =5,482.*10%= 548.3 =6,032 -548.3=5483.7 =0

 Exercise
Principle portion vs Interest portion

Loan principal =$15,000

Interest rate =10% per year
Duration of loan = 3 years
What percentage of the principle portion was paid by the end of year three?
Answer= 5483.7/ 6032=90.9%

Year A Interest Portion Principal Portion Remaining

Balance
0 15000

1 6,032 1500 = 6,032- 1500=4532 =15000-4532= 10,468

2 6,032 =10,468*10%=1046.8 =6,032- 1046.8=4985.2 =10,468- 4985.2=5,482.8

3 6,032 =5,482.*10%= 548.3 =6,032 -548.3=5483.7 =0