ACC121 W6 Exercises

1. a)
NR Terms EAR
Bank A 6% Annually 6.00%
B 6% Semi-annually 6.09%
C 6% Quarterly 6.14%
D 6% Monthly 6.17%
E 6% Daily 6.18%

End of 1 yr Deposit EAR Amount

Bank A ₱ 50,000.00 106.00% 53,000.00
B 50,000.00 106.09% 53,045.00
C 50,000.00 106.14% 53,068.18
D 50,000.00 106.17% 53,083.89
E 50,000.00 106.18% 53,091.57

End of 2 yrs Deposit EAR Amount

Bank A ₱ 50,000.00 106.00% 56,180.00
B 50,000.00 106.09% 56,275.44
C 50,000.00 106.14% 56,324.63
D 50,000.00 106.17% 56,357.99
E 50,000.00 106.18% 56,374.29

b)
No, these banks would not be able to
equally attract funds.

The effective interest rate would be the main

focus (or deciding factor) with risk being the same.
Whichever bank has the highest effective
interest rate is the most attractive bank.

Bank A with an annual payment has a 6% EAR.

Bank A 6.00%
Bank B 5.91%
Bank C 5.87%
Bank D 5.84%
Bank E 5.83%

c) Bank A 50,000.00 1.06 47,169.81

B 50,000.00 2.03 24,630.54
C 50,000.00 4.09 12,222.24
D 50,000.00 12.34 4,053.32
 E 50,000.00 376.14 132.93

d) No, I believe the same effective annual rate

would not do as much.

It should be the risk that would be the deciding factor for

an investor.

2. Year 1
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 2
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 3
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 4
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 5
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 6
Inflow Outflow Balance
 Pension after SSS 15000 Living expenses 1800000
Mutual fund 1785000
(Note) Increase in MF 350000
0

Year 7
Inflow Outflow Balance
Pension after SSS 15000 Living expenses 1800000
Mutual fund 1390000
(Note) Increase in MF 350000
-395000

My client will run out of money after 7 years.

3. a) I would have bid:

$ 4,761,723.78

b) Enhance Reinsurance Company, with its $4.2 million, was looking for:
??
hindi ko po magets sir hahahashs sorry po
Current MF Balance

8565000

Current MF Balance

7130000

Current MF Balance

5695000

Current MF Balance

4260000

Current MF Balance

2825000

Current MF Balance
 1390000

Current MF Balance

, was looking for: