Name: Karen May B.

Alonsagay
Course and Sec: BSBA-FM 3B
Subject: Financial Management 1 - B

1. You have saved Php 200,000 for a down payment on a new family vehicle. The largest monthly payment you can
afford is Php 17,500. The loan will have a nominal rate of 12% and payments are made at the end of each month.
What is the most expensive vehicle you can afford if you finance it for 48 months? For 60 months?

Annuity Payment (PNT) = Php. 17,500

Interest rate (r) = 12%

Time in Years (t) = 4 years (a); 5 years (b)

Compounding periods (n) = Monthly (12 times per year)

Required; Present value (PV) of investment

− ( t) ( n)
r
Formula: PVoa=PMT
1− 1+( ) n
r
n

A. 48 months/ 4-year term

Formula:
− ( t) ( n)
r
PVoa=PMT
( )
1− 1+
n
r
n
− ( 4 ) ( 12 )
0.12
PVoa=PMT
1− 1+
12( )
0.12
12
1−0.6202604
PVoa=17,500
0.01
0.3797396
PVoa=17,500
0.01
PVoa=₱ 664,544.3

Total Amount of cash available to spend:

= loan proceeds + down payment saved

 = 664,544.3 + 200,000

=₱ 864,544.3

B. Formula:
− ( t) ( n)
r
PVoa=PMT
( )
1− 1+
n
r
n
− ( 5 )( 12 )
0.12
PVoa=PMT
1− 1+
12 ( )
0.12
12
1−0.5504496
PVoa=17,500
0.01
0.4495504
PVoa=17,500
0.01
PVoa=₱ 786,713.2
Loans proceeds + Down payment saved

= 786,713.2 + 200,000

= ₱ 986,713.2

Answer:

A. 864,544.3

B. 986,713.2
2. Renz Castro recently received a credit card with an 18% nominal interest rate. With the card, he
purchased PC unit for Php 18,635.50. The minimum payment on the card is only Php 500 per month.
A. If Renz makes the minimum monthly payment and makes no other charges, how many months will it
be before he pays off the card? Round to the nearest month.
B. If Renz makes monthly payment of Php 1,750, how many months will it be before he pays off the
debt? Round to the nearest month.
C. How much in total payments will Renz make under Php 500-a-month plan than with the Php 1,750-a-
month plan? Make sure you use three decimal places for N.

Formula:

( rn )
t=
[
log 1−
PV

PMT ]
−12 log 1+ ( rn )
Given:

Present value (PV)= ₱ 18,635.50

Annuity payment(PMT)= ₱ 500

Interest rate (r)= 18%

Compounding periods (n)= Monthly (12)

( 0.18
a)
t=
[
log 1−
18,635.50

500
0.18
12 )
]
(
−12 log 1+
12 )
log [ 1−0.559065 ]
t=
−12 log ( 0.015 )
 log [ 1−0.440935 ]
t=
−12 log ( 0.0064660422 )

−0.3556254269
t=
−0.0775925064

t=4.58324 years

t=4.58324 ×12

t ¿ 55 months

b) Present value (PV)= ₱ 18,635.50

Annuity payment(PMT)= ₱ 1,750
Interest rate (r)= 18%
Compounding periods (n)= Monthly (12)

( 0.18
t=
[
log 1−
18,635.50

1,750
0.18
12 )
]
−12 log 1+( 12 )
log [ 1−0.1597328571 ]
t=
−12 log ( 0.015 )

log [ 0.8402671429 ]
t=
−12 ( 0.0064660422 )

0.07558261841
t=
0.0775925064

¿ 0.9741 years
¿ 0.9741 X 12
t ¿ 12 months

c) Number X Number = Number X Monthly = Total

of years per year of Payments payment payment
 Plan 1 (500/month) 4.58324 X 12 = 55 X 500 = 27,500
Plan 2 (1,750/month) 0.9741 X 12 = 11.689 X 1,750 = 20,455.75
7,044.25
A. 27,500
B. 20,455.75