ACTIVITY

1. Mr. Mendoza wishes to determine how much will be the value of his savings in 5 years if he will put
PHP1,000 per year in a bank which provides 7% interest per annum.

2. Mr. Yusoph wants to buy a pair of shoes worth P10,500. He has the option of paying it today for
PHP10,500 or buying in instalment where he has to pay a down payment of PHP4,000 today, and the
balance will be paid in two equal payments of PHP4,000 each for the next two years. Given an
interest rate of 10%, which is the better option?

3. You deposited PHP1,500 in a bank with an interest rate of 5% for 1 year. What is the future value of
your deposit?

4. You need to save up for P1,500 in 1 year. How much should you save now if the bank offers a rate of
5%?

5. Compute the present value and future value of P100 cash flow for the following combination of
discount rates and times:
A. r = 8%, t = 5 years
B. r = 8%, t = 10years
C. r = 5%, t = 5years
D. r = 5%, t = 10 years

6. Mario will be making a lump sum payment of PHP1.6 million on the condominium he is buying two
years from now. If he wants to set aside funds from now and invest it that will earn interest of 3%, net
of taxes every year and this amount is compounded annually, how much does he need to invest today?
What if the interest is compounded semi-annually, how much does he need to invest today?

7. On January 1, 2015, Mac Inc. issued 3,000,000 bonds with a coupon rate of 8% maturing in 4 years.
The interest is paid annually, and the market interest rate at the date of issue was 11%. What is the
issue price of the bond? Prepare the 4 year amortization schedule for the bond.

8. On January 1, 2014, Sonic Co. issued 4,000,000 12% bonds maturing in 5 years. The bonds pay
interest semi-annually. The market rate of interest as of the date of issuance is 10%. What is the issue
price of the bond? Prepare the 5 year amortization schedule for the bond.