FINANCIAL MANAGEMENT

TIME VALUE OF MONEY

QUIZ #1

1. Suppose you put P250 at the beginning of every month in a savings account that credits
interest at the annual rate of 6%, but compounds it monthly. Find the amount in this account
after 25 years.

2. You have decided to put P130 in a savings account at the end of each month. The savings
account credits interest monthly, at the annual rate of 6%. How much money is in your
account after 6 years?

3. Fred Abbott has just opened an IRA in which he plans to deposit P150 at the end of every
month. The account will compound interest monthly at the annual rate of 9%. How much
money will Fred have after 25 years in this account?

4. You have started a job with an annual salary of P48,000. You will get the paycheck at the end
of each month, and your deductions for taxes will be 34%. Using a discount rate of 0.8% per
month, find the present value of the take home pay for the whole year.

5. Suppose you want to accumulate P10,000 for a down payment for a house. You will deposit
P400 at the beginning of every month in an account that credits interest monthly at the rate of
0.6% per month. How long will it take you to achieve your goal?

6. James Earl has decided to save a million pesos by depositing P50,000 at the beginning of
each year in an account that pays interest at the rate of 10%, compounded annually. How
long will it take him to reach his objective?

7. Suppose you are a property owner and you are collecting rent for an apartment. The tenant
has signed a one-year lease with P600 a month rent, payable in advance. Find the present
value of the lease contract if the discount rate is 12% per year.

8. West Bank gives consumer loans at the annual interest rate of 8.25%. Suppose you take out a
P5,200 loan for 36 months, what will your monthly payment be?

9. Bennington Company has borrowed a certain amount from the bank that it will repay in 24
monthly installments. The bank charges 6% interest annually on this loan and the monthly
payment is P6000. Find the amount of loan.

10. On January 1, 2019, an entity acquired an equipment for P1,000,000. The entity paid
P100,000 down and signed a noninterest bearing note for the balance which is due after three
years on January 1, 2021. There was no established cash price for the equipment. The
prevailing interest rate for this type of note is 10%. Determine at what amount should the
equipment be recorded by the entity?