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1.IF MONEY IS WORTH 12%, FIND THE PRESENT VALUE OF PERPETUITY OF P20,000
PAYABLE AT THE BEGINNING OF EACH YEAR .
𝐴
𝑃 =𝐴+
𝑖
20000
𝑃 = 20000 +
0.12
𝑃 = 𝑃21666.67
2.IF MONEY IS 8%, OBTAIN THE PRESENT VALUE OF A PERPETUITY OF P1000 PAYABLE
ANNUALLY WHEN THE IRST PAYMENT DUE AT THE END OF 5 YEARS .
𝑃 𝑃[(1 + 𝑖)𝑛 − 1]
𝐴= −
𝑖 (1 + 𝑖)𝑛 𝑖
1000 1000[(1.08)4 − 1]
𝐴= −
0.08 (1.08)4 (0.08)
𝐴 = 𝑃9187.87
0.04 4
(1 + ) = (1 + 𝑖)2
4
(1.01)4 = (1 + 𝑖)1
1 + 𝑖 = 1.0201
𝑖 = 0.0201 (𝑒𝑣𝑒𝑟𝑦 𝑠𝑖𝑥 𝑚𝑜𝑛𝑡ℎ𝑠)
𝑃
𝐴=
𝑖
100
𝐴= = 𝑃4975.12 (𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑝𝑒𝑟𝑝𝑒𝑡𝑢𝑖𝑡𝑦)
0.0201
5.P45,000 IS DEPOSITED IN A SAVINGS ACCOUNT THAT PAYS 5% INTEREST COMPOUNDED
SEMI- ANNUALLY . EQUAL ANNUAL WITHDRAWALS ARE TO BE MADE FROM THE ACCOUNT ,
BEGINNING ONE YEAR FROM NOW AND CONTINUING FOREVER . COMPUTE THE MAXIMUM
AMOUNT OF THE EQUAL ANNUAL WITHDRAWAL .
0.05 2
(1 + ) = (1 + 𝑖)1
2
1 + 𝑖 = 1.050625
𝑖 = 0.050625
𝐴
𝑃=
𝑖
𝐴 = 45000(0.050625)
𝐴 = 𝑃2278.13
7.WHAT PRESENT SUM WOULD BE NEEDED FOR ANNUAL END OF YEAR PAYMENTS OF
P25,000 EACH, FOREVER IF MONEY IS WORTH 22%
𝐴
𝑃=
𝑖
25000
𝑃=
0.22
𝑃 = 𝑃5500
10.IF MONEY IS WORTH 4%, FIND THE PRESENT VALUE OF PERPETUITY OF P100 PAYABLE
AT THE BEGINNING OF EACH YEAR .
𝐴
𝑃 =𝐴+
𝑖
100
𝑃 = 100 +
0.04
𝑃 = 𝑃2600