Quest

ion1of20

1Poi
nt

Youar
econsi
der
ingi
nvest
ingi
nazer
o-coupon

bondt
hatsel
l
sforP500.Atmat
uri
tyi
n8

y
ear
s,i
twi
l
lber
edeemedf
orP1,
000.Dur
ing

t
hel
i
feoft
hebond,
NOi
nter
estcouponswi
l
l

bepai
d.Usi
ngt
heRul
eof72,
what

appr
oxi
mat
eannual
rat
eofgr
owt
hdoest
his

r
epr
esent
?

Ans:
9%

2.
Quest
ion2of20

1Poi
nt

Youhav
ejustgr
aduat
edandhav
edeci
dedt
o

pur
chaseabrandnewspor t
scartoenjoyy
ournewfoundfr
eedom.Yourl
ocal
credi
tunior
n
wil
l
provi
defi
nancingfor60monthsata9percentannual
rate,
compoundedmonthl
y.Youwi
l
l
gi
ve15percentoftheP26,
000purchasepr
ice

i
ncasht
othedeal
er.Thecr
edi
tuni
onwi
l
lbe

usedt
ofi
nancet
her
emai
ning85per
centof

t
hepur
chasepr
icewi
tht
hef
ir
stpay
mentdue

1mont
hfr
om t
oday
.Whatwi
l
lbey
our

mont
hlypay
ment
?

Sel
ectt
hecor
rectr
esponse

Ans:
P458.
76
3.
In2y
ear
syouar
etor
ecei
veP10,
000.I
fthe

i
nter
estr
atewer
etosuddenl
ydecr
ease,
the

pr
esentv
alueoft
hatf
utur
eamountt
oyou

woul
d

Sel
ectt
hecor
rectr
esponse:

Ans:
ri
se

4.
Quest
ion4of20

1Poi
nt

Youexpectt
odeposi
tthef
oll
owi
ngcashf
lows

att
heendofy
ear
s1t
hrough5,
P1,
000;

P4,
000;
P9,
000;
P5,
000;
andP2,
000

r
espect
ivel
y.Whati
sthef
utur
eaccountv
alue

att
heendofy
ear6i
fyoucanear
n10%

compoundedannual
l
y?

Sel
ectt
hecor
rectr
esponse:

Ans:
P27,
695.
91
Quest
ion5of20

1Poi
n

Shot
aroBankpay
s5.
60%,
compoundeddai
l
y

(
basedon360day
s),
ona9-
mont
hcer
ti
fi
cat
e

ofdeposi
t.I
fyoudeposi
tP20,
000y
ouwoul
d

expectt
oear
nar
oundBLANKi
nint
erest
.In

sol
vi
ng,
expr
essi
nter
estr
atet
oit
sdai
l
y

equi
val
ent
.

Sel
ectt
hecor
rectr
esponse

Ans:
P858

Quest
ion6of20

1Poi
nt

Toi
ncr
easeagi
venf
utur
eval
ue,
thedi
scount

r
ateshoul
dbeadj
ust
ed

Sel
ectt
hecor
rectr
esponse:

Ans:
upwar
d

.
Quest
ion7of20

Assumet
hatt
hei
nter
estr
atei
sgr
eat
ert
han

zer
o.Whi
choft
hef
oll
owi
ngcash-
inf
low

st
reamst
otal
i
ngP1,
500woul
dyoupr
efer
?

Thecashf
lowsar
eli
stedi
nor
derf
orYear1,

Year2,
andYear3r
espect
ivel
y.

Sel
ectt
hecor
rectr
esponse

Ans:
P700P500P300

Quest
ion8of20

Youar
econsi
der
ingbor
rowi
ngP100,
000f
or

30y
ear
satacompoundannual
int
erestr
ate

of9per
cent
.Thel
oanagr
eementcal
l
sfor30

equal
annual
pay
ment
s,t
obepai
datt
heend

ofeachoft
henext30y
ear
s.(
Pay
ment
s

i
ncl
udebot
hpr
inci
pal
andi
nter
est
.)Whati
s

t
heannual
pay
mentt
hatwi
l
lful
l
yamor
ti
zet
he

l
oan?

Sel
ectt
hecor
rectr
esponse:

Ans:
P9,
733.
63
Quest
ion9of2o

Youhav
ejustagr
eedt
oanewl
oanandhav
e

pur
chasedaP3,
000comput
ert
oday
.Thel
oan

hasa19.
6%annual
int
erestr
ate,
compounded

mont
hly
.Themi
nimum mont
hlypay
menti
s

P58andy
oudonotexpectt
oev
erpaymor
e

t
hant
hemi
nimum pay
ment
.Assumi
ngno

addi
ti
onal
char
gesorcost
swi
l
loccurwi
tht
his

l
oan,
appr
oxi
mat
elywhatwi
l
lyouoweont
he

l
oanatt
heendof3y
ear
s(36mont
hs)when

y
ouexpectt
oneedanot
hernewcomput
er?

Sel
ectt
hecor
rectr
esponse:

Ans:
P2,
564

Quest
ion10of20

I
nter
estpai
d(ear
ned)onbot
htheor
igi
nal

pr
inci
pal
bor
rowed(
lent
)andpr
evi
ousi
nter
est

ear
nedi
sof
tenr
efer
redt
oas

Sel
ectt
hecor
rectr
esponse:

Ans:
compour
ndi
nter
est
Quest
ion11of20

Youexpectt
odeposi
tthef
oll
owi
ngcashf
lows

att
heendofy
ear
s1t
hrough5,
P1,
000;

P4,
000;
P9,
000;
P5,
000;
andP2,
000

r
espect
ivel
y.Al
ter
nat
ivel
y,y
oucoul
ddeposi
ta

si
ngl
eamountt
odayatt
hebegi
nni
ngofy
ear1

(
endofy
ear0)
.Howl
argedoest
hesi
ngl
e

deposi
tneedt
obet
odayi
fyoucanear
n10%

compoundedannual
l
y?Hi
nt:
thepr
esentv
alue

t
oday(
t=0)i
sident
ical
tot
hesi
ngl
ecashf
low

amount
.

Sel
ectt
hecor
rectr
esponse:

Ans:
P15,
633.
62

Quest
ion12.

ForP1,
000y
oucanpur
chasea5-
yearor
dinar
y

annui
tywhi
chwi
l
lpayy
ouay
ear
lypay
mentof

P263.
80f
or5y
ear
s.Whati
stheannual

i
nter
estr
atei
mpl
i
citi
nthi
sinv
est
mentt
othe

near
estwhol
eper
cent
agepoi
nt?

Sel
ectt
hecor
rectr
esponse

Ans:
10%
Quest
ion13of20

Youar
egoi
ngt
opl
aceP12,
500i
ntoa

cer
ti
fi
cat
eofdeposi
t(CD)ata6%annual
rat
e

(
compoundedannual
l
y)wi
thamat
uri
tyof30

mont
hs.Howmuchmoneywi
l
lyour
ecei
ve

whent
heCDmat
ures?(
Expr
essy
ourt
ime

per
iodi
nter
msofy
ear
s.)

Sel
ectt
hecor
rectr
esponse:

AnsP14,
460

Quest
ion14of20

Youwantt
ohav
eP1,
000,
000wheny
our
eti
re

i
n30y
ear
s.Youexpectt
oear
n12%

compoundedmont
hlyov
ert
heent
ir
e30-
year

per
iod.Howmuchext
ramoneypermont
h

musty
oudeposi
tify
ouchooset
ofundusi
ng

anor
dinar
yannui
tyt
echni
quer
athert
hanan

annui
tyduet
echni
que?

Sel
ectt
hecor
rectr
esponse

Ans:
P2.
84
Quest
ion15of200

Whati
sthepr
esentv
alueofaP1,
000or
dinar
y

annui
tyt
hatear
ns8%annual
l
yforani
nfi
nit
e

numberofper
iods?

Sel
ectt
hecor
rectr
esponse:

Ans:
P12,
500

Quest
ion16of20

Youwonacont
estatal
ocal
busi
nesst
hathas

pai
dyouasi
ngl
eP5,
000.At22,
youhav
e

deci
dedt
oinv
estt
hesef
undsf
or45y
ear
s

unt
ily
our
eti
re.Dur
ingt
hist
imey
ouraccount

wi
l
lear
n13%,
Compoundedannual
l
y,ev
ery

y
ear
.Assoonasy
our
eti
re(
exact
il
y45y
ear
s

f
rom t
oday
)youwi
l
lst
artwi
thdr
awi
ng

r
eti
rementf
undsev
eryy
earf
oranaddi
ti
onal

33y
ear
s,buty
ouar
einv
est
ingmor
e

conser
vat
ivel
yat8%compoundedannual
l
y.

Howmuchcany
ouwi
thdr
aweachy
eari
n

r
eti
rement
?

Sel
ectt
hecor
rectr
esponse:

Ans:
P106,
237
Quest
ion17of20b

Wi
thcont
inuouscompoundi
ngat8per
centf
or

20y
ear
s,whati
stheappr
oxi
mat
efut
urev
alue

ofaP20,
000i
nit
ial
inv
est
ment
?

Sel
ectt
hecor
rectr
esponse:

Ans:
P99,
061

Quest
ion18of20

1Poi
nt

Whi
choft
hef
oll
owi
ngwi
l
ldecr
easet
he

pr
esentv
alueoft
hemi
xedcashf
lowsf
or

y
ear
s1t
hrough5ofP1,
000;
P4,
000;
P9,
000;

P5,
000;
andP2,
000r
espect
ivel
ygi
vena10%

di
scountr
ate?

Sel
ectt
hecor
rectr
esponse

Ans:
Swi
tchcashf
lowsf
ory
ear
s2and5

sot
haty
ear2i
sP2,
000andy
ear5

i
sP4,
000.
Quest
ion19of20

1Poi
nt

I
nter
estpai
d(ear
ned)ononl
ytheor
igi
nal

pr
inci
pal
bor
rowed(
lent
)isof
tenr
efer
redt
oas

Sel
ectt
hecor
rectr
esponse:

Ans:
simpl
eint
erest

Quest
ion20of20

Whi
choft
hef
oll
owi
ngst
atement
sismost

cor
rect
?

Sel
ectt
hecor
rectr
esponse:

Ans:
Thef
utur
eval
ueofanannui
tydue

i
sgr
eat
ert
hananot
her
wise

i
dent
ical
ordi
nar
yannui
ty.