A. Key Concepts: Simple Interest, Nominal Interest, Compounded Interest
1.
What is the simple annual rate of interest if P350 is earned in six months on an investment of P7000.
a. 10%
b. 20%
c. 15%
d. 16.67%
2.
A man borrowed P12,000 and agreed to pay the loan in one year. The bank discounted the loan and gave him
P10,000 in cash. What was the rate of discount?
a. 10%
b. 20%
c. 15%
d. 16.67%
3. What was the effective interest? (Refer to previous number) )
a. 10%
b. 20%
c. 15%
d. 16.67%
4.
A nominal interest rate of 12% per annum compounded monthly is equal to what nominal interest compounded
quarterly?
a. 12.49%
b. 12.12%
c. 12.68%
d. 13.34%
5.
What is the effective interest rate? (refer to the previous problem)
a. 12.68%
b. 12.12%
c. 12.58%
d. 13.34%
6.
A company borrowed P100,000 to be repaid after 3 years at a simple interest rate of 11% pa. What is the actual
amount owed at the end of 3 years.
a. P136,763
b. P118,141
c. P136,410
d. P133,000
7.
A company borrowed P100,000 to be repaid after 3 years at a compounded rate of 11%.. What is the actual amount
owed at the end of 3 years.
a. P136,763
b. P118,141
c. P136,410
d. P1180,400
8.
A credit card company charges an interest rate of 1.375% per month on the unpaid balance of all accounts. The
annual interest, they claim, is 12(1.375%) =16.5%. What is the effective interest rate per year being charged by the
company?
a. 16.5%
b. 17.81%
c. 17.55%
d. 18.5%
9.
Determine the ordinary simple interest on P12,000 from the period Jan 15, 1997 to October 30, 1997 if the rate of
simple interest is 12%.
a. P1,140
b. P1,110
c. P1,410
d. P1,040
10. A vendor borrows P5,000 from a savings credit association. Instead of giving him the full amount, the interest
was deducted from his loan to cover the interest for one year, thus he only received P 4,500. What is the
discounted rate of interest?
a. 10%
b. 11.11%
c. 12%
d. 12.5%
11. What will be the future worth after 18 months if a sum of P1,000 is invested at a simple interest of 10% per year?
a. P 1,150
b.
P 1,157.62
c. P 1,153.69
d. P1,510
12. How much are you going to deposit now so that you are going to accumulate P2.0M after 5 years including
interest? Your deposit earns 6% pa compounded semi-annually.
a. P1.4888 M
b. P1.4945M
c. P1.7252M
d. P1.1168M
13. If P200,000 is invested at 12% per annum compounded quarterly, the annual interest for the investment is nearest
to:
a. P24,502
b. P 24,000
c. P25,450
d. P25,100
14. A small businessman deposited P200,000 after six months, P100,000 after one year, and P150,000 after 18
months. What is the equivalent amount now of his deposits if his deposits earns 8% pa compounded quarterly?
a. P410,132
b. P450,000
c. P417,814
d. P501,000
15. What is the equivalent amount of the three deposits 2 years from now?
a. P489,535.69
b. P450,000.75
c. P417,814.98
d. P501,000.76
16. What is the equivalent of the three deposits one year from now.
a. P452,255.31
b. P450,000.55
c. P417,814.86
d. P501,000.89
17. A credit union pays 6.5% annual interest compounded daily. What deposit today would amount to P3000 in 5
years and 4 months? Use 365 days per year and 30 days per month.
a. 2,121.82
b. 2,231.90
c. 2,341.90
d. 2,061.60
18.
Using 12 percent simple interest per year, how much interest will be owed on a loan of P5,000 at the
end of two years?
a. 5,900
b. 5,450
c. 6,450
d. 6,750
19. If a sum of P30,000 is borrowed for six months at 9 percent simple interest per year, what is the total
amount due (principal and interest) at the end of six months
a. 31,350
b. 31,450
c. 32,450
d. 33,750
20. What principal amount will yield P1500 in interest at the end of three months when the interest rate is
1 percent simple interest per month?
21. If P2400 in interest is paid on a two-year simple-interest loan of P12, 000, what is the interest rate per
year?
a. 6.66%
b. 5.40%
c. 7.86%
d. 6.75%
22. How much will be in a bank account at the end of five years if P20,000 is invested today at 12 percent
interest per annum, compounded yearly?
a. 35,246.83
b.35,450.83
c. 36,450.83
d. 36,750.85
23. How much is accumulated in each of these savings plans over two years?
(a) Deposit P10,000 today at 10 percent compounded annually.
a. 12,100
b. 12,450
c. 12,450
(b) Deposit P9,000 today at 12 percent compounded monthly.
a. 11,427.61
b. 11,450.45
c. 12,450.54
d. 16,750
d. 16,750.87
24. Greg wants to have P500,000 in five years. The bank is offering five-year investment certificates that pay
8 percent nominal interest, compounded quarterly. How much money should he invest in the certificates
to reach his goal?
a. 336,485.67
b.33 5,450.76
c. 346,450.87
d.33 6,750.87
25. Greg wants to have P500,000 in five years. He has P200 000 today to invest. The bank is offering five-year
investment certificates that pay interest compounded quarterly. What is the minimum nominal interest
rate he would have to receive to reach his goal?
a. 18.75%
b. 15.40%
c. 17.86%
d. 16.75%
26. The Bank of Brisbane is offering a new savings account that pays a nominal 7.99 percent interest,
compounded continuously. Will your money earn more in this account than in a daily interest account
that pays 8 percent?
27. Hans now has P60,000. In three months, he will receive a check for P20,000. He must pay P9000 at the
end of each month (starting exactly one month from now). Draw a single cash flow diagram illustrating
all of these payments for a total of six monthly periods. Include his cash on hand as a payment at time 0.
28. Margaret is considering an investment that will cost her P5,000 today. It will pay her P1000 at the end of
each of the next 12 months, and cost her another P3,000 one year from today. Illustrate these cash flows
in two cash flow diagrams. The first should show each cash flow element separately, and the second
should show only the net cash flows in each period.
29. Heddy is considering working on a project that will cost her P200,000 today. It will pay her P100,000 at
the end of each of the next 12 months and cost her another P150,000 at the end of each quarter. An
extra P100,000 will be received at the end of the project, one year from now. Illustrate these cash flows
in two cash flow diagrams. The first should show each cash flow element separately, and the second
should show only the net cash flow in each period