ME Prelim Quiz #3

Interests, inflation, escalation, annuity

1. A bank deposit of P10, 000 will have a real value of P10,288.44 after three years. If inflation is at the rate of 5% per
year, what will be the bank earning rate in % pa compounded monthly?
a. 5.84% b. 6.00% c. 6.32% d. 11.68%

2. In how many years will an investment of P100, 000 earn a total interest of P26,824.18 if the
earning rate is 8% pa compounded quarterly?
a. 3 b. 2.5 c.12 d. 4
3. The actual escalated unit price of the goods is P120. The increase in price incorporates the annual inflation at 5%. What is
the real annual percent escalation price of the goods if the old unit price was P100 two years ago?
a. 4.33% b. 14.29% c. 2.60% d. 5.73%

4. A young engineer at the age of 25 contributes P 250 a month into the retirement fund. What is the accumulated amount
when the engineer reaches 60 years old if the effective interest earned by the monthly deposits is 12.68% pa?
a. 5,886,386 b. 1,607,740 c. 3,857,622 d. 1,542,876

5. Mr. Eden borrows from the bank P600, 000 at 12% pa compounded quarterly, agreeing to pay the loan in 15 equal quarterly
payments. What should the quarterly payments be if the first payment is to be made one year from now?
a. P54,920.40 b. P53,320.78 c. P55,320.78 d. P56,568.01