BUSANA 1 PRACTICE EXERCISE 2

I. Equation of Values, Varying Interest Rates, Continuous Compounding

1. Which of the following amounts of money has the highest value?
a. P 30,000 due at the end of 8 years
b. P 24,000 due at the end of 5 years
c. P 21,000 due at the end of 3 years
Money is worth 8% compounded quarterly. Use end of 6 years as comparison date.

2. Lucas owes Nathan P12,000 due in 3 years and P18,000 in 7 years. Lucas decides to
settle his obligations by paying P13,000 on the 5th year and a second payment in 8 years. If
money is worth 16% compounded semi-annually , how much is the second payment?
3. A man owes the following obligations:
a. P2000 due today
b. P 4000 due in 9 months with accumulated simple interest from today at 12%
c. P10000 due in 2 years with accumulated interest from today at 10% (m = 2)
If the man wishes to pay these debts by a payment of P3000 in 1 year and P5000 in
1 12 years and a last payment in 3 years, how much should this last payment be if money is
worth 14% compounded quarterly?
4. In return for payment of P5000 at the end of 4 years and P8500 at the end of 9 years, a
man agrees to pay P1000 at once and P3000 at the end of 6 years and two equal payments
at the end of 8 years and 10 years, respectively. Find how much each payment is if money
is worth 18% compounded semi-annually.
5. What single payment on Dec2, 2016 would replace the following debts:
a. P25,000 due on Dec 2, 2014
b. P18,000 due on Dec 2, 2018
c. P12,000 due on Nov 2, 2019
if money is worth 12% compounded monthly?
6. Find the amount at the end of 15 years if P50,000 is invested at an interest rate of 10%
compounded quarterly in the first 5 years, 9% compounded semiannually in the second 5 years,
and 8% simple interest rate in the last 5 years.
7. On June 21, 2006, Skylar invested P40,000 in a fund. How much money will she have on
Sept. 21, 2015 if the rate of interest is 9% compounded every 4 months until June 21, 2011 and
then change to 10% compounded every 3 months in the remaining years?
8. Find the amount due at the end of 8 years if P35000 is invested at 12% converted continuously
for the first 4 years and 14% converted quarterly for the last 4 years.
9. If P20,000 is invested in a fund that pays (5%, m = 4) for the first 3 years, (3.5%, m = 2)
for the next 5 years and 4% compounded continuously thereafter. How much would be
in the fund at the end of 15 years?
10. Find the amount of P50,000 at the end of 8 years at 10% compounded
a. annually c. quarterly e. continuously
b. semiannually d. monthly

11. Find the present value of P22,000 due in 1.5 years if money is worth 6% compounded
a. semiannually c. monthly
b. quarterly d. continuously

12. How much should be invested now in order to have P500,000 in 3 years if it is invested at 6 23 %
compounded continuously?
13. What rate compounded monthly is equivalent to 8.15% compounded continuously?
14. What rate compounded continuously is equivalent to 5% effective?
15. What effective rate is equivalent to 6% compounded continuously?

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BUSANA 1 PRACTICE EXERCISE 2

Annuity
1. An ordinary annuity pays P7,000 every 6 months for 3 years. Find the amount by adding the
accumulated values of all the payments to the end of 3 years if money is worth 8% compounded
semiannually.
2. Find the present value of an ordinary annuity of P12,000 payable every 3 months for one and
a half years by adding the present values of all the payments. Money is worth 4% compounded
quarterly.
3. Find the amount and present value of a P2000 ordinary annuity payable semi-annually for
4 years if money is worth 13.75% converted semi-annually.
4. An air conditioner is for sale at P36,000 in cash or on terms- P4000 down and P2800 monthly
for the next 12 months. If you were the buyer, which purchase plan would you prefer? Money is
worth 15% compounded monthly.
5. Aldrin invests P5000 every 4 months at 12% compounded every 4 months. Find his savings in
one year and eight months.
6. If P55000 is the amount of a 4-year annuity, what is the present value of this annuity if money is
worth 9% compounded quarterly?
7. Don Juan wishes to donate an amount to an orphanage. The amount will provide P15000 every
2 months for the institutions feeding program for 5 years. If money is invested at 12%
compounded every 2 months, how much should he donate?
8. A furniture set was purchased with a down payment and the balance at P4000 every quarter for
nine months . If the cash price is P14535.53 and interest is charged at 8% compounded quarterly,
how much was the down payment?
9. Find the present value of ordinary annuity of 10 semiannual payments of P5,000 each if
the interest rate is 10% compounded semiannually.
10. Annette will deposit P10,000 in a fund at the end of each month for 3 years in preparation
for her retirement. If money is worth 15% compounded monthly, how much will be in the fund
a. just after the 10th deposit?
b. just after the last deposit?
c. at the end of 1.5 years?
11. A man wishes to have P180,000 in 2 12 years. He makes semi-annual deposits in a savings account
paying 6% compounded semiannually. Find his semi-annual deposit.
12. In buying a washing machine worth P 12,000, Aling Nena pays P2000 cash and agrees to make 15
monthly payments. If interest is charged at 16% compounded monthly, find the monthly
payment.
13. Mang Isko won P500,000 in Lotto. If he deposited it in a bank paying 12% compounded
quarterly, how much would he get every quarter for the next 5 years?
14. An amount of P400,000 is needed in 8 years to start a small business. How much should be placed
in a fund annually if money accumulates at 13.25% compounded annually?
15. If I deposit P5000 in fund at a credit cooperative at the end of each month and the fund
accumulates at 5% compounded monthly, how much is to my credit just after my 180th deposit?
16. A man will deposit a sum in a trust company just sufficient to provide his family P15000 per
month for 15 years. How much does he deposit if the fund accumulates at 4 12 % compounded
monthly ?
17. In order to have a building fund of P1,000,000 available at the end of 8 years & 3 months,
a church congregation will invest equal sums at the end of every 3 months at 5% compounded
quarterly. Find the quarterly investment.
18. A refrigerator is worth P40,000. A buyer pays P8,000 cash and agrees to make 24 monthly
payments. If interest is charged at (24%, m = 12), how much is the monthly payment?

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19. A contract calls for the payment of P12000 at the end of each year for 15 years. At what interest
rate compounded annually would this agreement be equivalent to a cash payment of P114000?

20. At the end of each 6 months, P3000 is deposited in a fund. At what rate compounded semi-annually
does the fund accumulate if it contains P87000 just after the 21st deposit?
21. A loan of P60,000 with interest at 15% compounded every 2 months is to be repaid by 20 equal
payments made at the end of every 2 months. Find the size of each payment.
22. In purchasing a digital camera with cash worth of P110,000, a man makes a P10,000 down
payment and agrees to pay P2000 monthly for 5 years . At what interest rate compounded
monthly was the interest charged?
23. A corporation will invest P88,000 in a fund semi-annually to accumulate to P5,000,000 in
16 12 years to initiate a plant overhaul. At what rate compounded semi-annually was the fund
earning interest?
24. A component is worth P15,000, John pays P3000 down and promises to pay P2000 every
3 months . If he is charged 10% interest compounded quarterly ,
a. how many full quarterly payment of P2000 must he make?
b. how much will the final payment be if it is made 3 months after the last payment of P2000?
When should this payment be made?
25. Anna deposits P1,000 every month in a fund earning 12% compounded monthly . If she desire to
accumulate P50,000, how many monthly deposits of P1000 must she make? How much will the
final deposit be if it is to be made
a. together with the last deposit of P1,000?
b. one month after the last deposit of P1,000?
26. In discharging a debt of P20,000 at 10% interest (m = 2), the debtor agrees to pay semi-annually
a sum for 7 years, plus a P2000 final payment on the 8th year. Find the semi-annual payment.

27. Jean invested P300,000 on Aug 21, 2013 at 6% compounded monthly. She withdrew P5000
monthly for her daughters allowance , the first of which is received by her daughter on
Sept 21, 2013. How many monthly allowance of P3000 did she give her daughter? How
much was the final allowance? When did her daughter receive it?

28. A fund of P150,000 is to be created by depositing P8000 semi-annually. If the fund earns
8% compounded semi-annually,
a) how many deposits of P8000 will be needed?
b) how much would the last deposit be if it is to fall on last full deposit date?
c) how much would the last deposit be if it is to fall one period after last deposit date?

29. A P62,000 debt bears interest at 8% converted annually. It is to be repaid by P12,000 at the end
of each year for as long as necessary.
a. How many annual payments of P12,000 must the debtor make?
b. How much is the final payment if it is to be made one year after the last P12,000
payment to completely pay off the debt?
c. How much is the final payment if it is to be made on the same day as the last P12,000
payment?