Concepts in Time Value of Money

Time Value of Money

PROBLEM SOLVING: Solve the following items. Write your answers and complete solutions
on the spaces provided. (5 items x 3 points)

1. Rachel wants to borrow P70,000 from the bank, at 5% rate and payable in five (5) years. Given
these data, how much interest would she pay?

Given: Formula: Solution:

P=₱ 70,000 I =PRT I =PRT

R=5 %=0.05 ¿ ₱ 70,000( 0.05)(5)
T =5 ¿ ₱ 70,000( 0.25)
¿ ₱ 17,500

2. Monica also has a loan with a bank. If the interest is P4,500 at 3% rate, payable in 10 years,
how much is the loan?

Given: Formula: Solution:

I I
I =₱ 4,500 P= P=
RT RT
₱ 4,500
R=3 %=0.03 ¿
0.03(10)
₱ 4,500
R=10 ¿
0.3
¿ ₱ 15,000
3. Phoebe is offered a P50,000 loan with an interest of P3,000, payable in six (6) years. What is
the rate?

Given: Formula: Solution:

I I
P=₱ 50,000 R= R=
PT PT
₱ 3,000
I =₱ 3,000 ¿
₱ 50,000(6)
₱ 3,000
T =6 ¿
₱ 300,000
¿ 0.01∨1 % rate

4. Ross has a P30,000 loan with P6,000 interest. If the rate is 4%, how much time does he have
to pay off the loan?

Given: Formula: Solution:

I I
P=₱ 30,000 T= T=
PR PR
₱ 6,000
I =₱ 6,000 ¿
₱ 30,000(0.04)
₱ 3,000
R=4 %=0.04 ¿
₱ 1,200
¿ 2.5 years

5. Joey takes out a P100,000 loan from the bank. If this loan has an interest rate of 7% and must
be paid in 15 years, what is the maturity amount of the loan?

Given: Formula: Solution:

P=₱ 100,000 A=P(1+ RT ) A=P(1+ RT )

R=7 %=0.07 ¿ ₱ 100,000(1+ ( 0.07 ) (15 ))
T =15 ¿ ₱ 100,000(1+1.05)
¿ ₱ 100,000( 2.05)
¿ ₱ 205,000