PROJECT NO.

3: LET’S GET PRACTICAL

A new brand of cell phone is for sale in SM Lucena at ₱ 13,499.00 in cash or in installment terms,

₱ 2,500.00 each month for the next 6 months at 9% compounded monthly.

Payment in cash = ₱ 13 499.00

Payment in installment terms = ₱ 14 613.99

1−(1+ j)−n
P=R
j
−6
0.09
P=2500
1−(1+
12
) ( )
0.09
( )
12

−6
1−(1+ 0.0075)
P=2500
0.0075

P=2500( 5.845597630269534303813115499262193849920)

P=14 613 . 99

14 613.99 – 13 499. 00 = 1 114.99

If I were the buyer, I would choose the in-cash basis. I chose that because I can save 1 114.99
pesos. The advantage of the in-cash basis is you can save money, but this will only happen if you
have that money in hand. On the other hand, installments can be handy if you are on a tight budget.
By doing this, it allows you to break up the total amount of your payments into easier-to-pay
chunks. But remember, installments always have that interest added so it is more expensive than the
in-cash basis. So you should compute the added interest first if it is in your advantage or not.

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 PROJECT NO. 5

Ask someone borrowing from a five-six ( Bumbay ) money lender. How much will be charged if you
want to loan ₱ 5,000.00, payable in one year? Determine the interest rate per period and the annual
interest rate. Is it a good loan term? Why or why not?

If you borrow ₱ 5 000.00 (payable in one year) on a five-six moneylender, then you will pay:
I=(5000)(0.20)(1)

I= ₱1000.00

₱5 000.00 + ₱ 1000.00 = ₱ 6 000.00, this will be the amount to be paid.

The annual interest rate of a five-six loan is 20 percent. But mostly, five-six moneylender will give you a choice
to pay daily, weekly, or monthly:

If you choose to pay daily:

0.20
=0.0005479452054∨0.05479 % , this will be your interest per period
365

If you choose to pay weekly: (a normal year has 52 weeks)

0.20
=0.0038461538461 or 0.38462%, this will be your interest per period
52

If you choose to pay monthly:

0.20
=¿ 0.0166666666 or 1.66667%, this will be your interest per period
12

Five-Six Moneylenders So-called because of the manner in which they lend, five-six (5-6)
moneylenders charge a nominal interest rate of 20 percent over an agreed period of time. But
mostly, five-six moneylenders will give you a choice to pay daily, weekly, or monthly.

If you choose to pay daily, you will have 0.05479% as your periodic interest rate, if you choose to
pay weekly, you will have 0.38462% as your periodic interest rate, and if you choose to pay
monthly, you will have 1.66667% as your periodic interest rate. If you think that the deal is not
bad, think again. This five-six moneylending is a great disadvantage for two reasons. First is the
high interest rate of the loan which is 20% per annum, the Philippines’ maximum interest rate
allowed is 12% per annum, if we compare the two, five-six annual rate is 8% higher than the
maximum rate allowed in the Philippines. Second, five-six money lending is considered illegal, The
Supreme Court already ruled that imposition of usurious interest rates such as “5-6
money lending” is illegal. So, It is better to borrow money in an authorized loaning

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 company but it will need several procedure, but it will be more worth it than the 5-6
moneylending.

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