A. A newly married couple decided to buy a brand new car. The net amount of loan is Php 500, 000. They
plan to amortize the loan in monthly instalments for 3 years. If money is worth 12% convertible monthly?
a. How much is the monthly instalment?
Answer: 𝑅 =
𝑃
1−(1+𝑗)−𝑛
[
]
𝑗
=
500,000
1−(1+0.01)−36
[
]
0.01
= 𝑷𝒉𝒑 𝟏𝟔, 𝟔𝟎𝟕. 𝟏𝟓
b. How much is the outstanding balance after the second payment?
Answer: 𝐵2 = 𝑅 [
1−(1+𝑗)−34
]
𝑗
= 16,607.15 [
1−(1+0.01)−34
]
0.01
= 𝑷𝒉𝒑 𝟒𝟕𝟔, 𝟔𝟔𝟗. 𝟔𝟑
c. How much is the third payment goes to pay the interest?
Answer: 𝐼3 = 𝑖(𝑃2 ) = 0.01(476.669.63) = 𝑷𝒉𝒑 𝟒, 𝟕𝟔𝟔. 𝟎𝟎
B. Suppose you want to buy a rent to own house worth P450,000. You made a down payment of 15% of
the purchase price and take a 25-year mortgage for the balance.
a. What is your down payment?
Answer: 𝐷𝑃 = 𝐶𝑎𝑠ℎ 𝑃𝑟𝑖𝑐𝑒 × 𝑅𝑎𝑡𝑒 𝑜𝑓 𝐷𝑃 = 450,000(15%) = 𝑷𝒉𝒑 𝟔𝟕, 𝟎𝟎𝟎. 𝟎𝟎
b. What is your mortgage amount?
Answer: 𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 𝐴𝑚𝑜𝑢𝑛𝑡 = 𝐶𝑎𝑠ℎ 𝑃𝑟𝑖𝑐𝑒 − 𝐷𝑃 = 450,000 − 67,500 = 𝑷𝒉𝒑 𝟑𝟖𝟐, 𝟓𝟎𝟎. 𝟎𝟎
c. What is the total interest charged over the life of the loan if your monthly payment is P2,200?
Answer:
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶ℎ𝑎𝑟𝑔𝑒𝑑
= (𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 × 𝑃𝑒𝑟𝑖𝑜𝑑 𝑜𝑓 𝑡𝑖𝑚𝑒 × 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑎 𝑝𝑒𝑟𝑖𝑜𝑑)
− 𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
= (2,200 × 25 × 12) − 382, 500 = 660, 000 − 382, 500 = 𝑷𝒉𝒑 𝟐𝟕𝟕, 𝟓𝟎𝟎. 𝟎𝟎
You work as a crew in the fast-food chain. You wanted to have a scooter type motorcycle for your daily
transportation going to your workplace but your monthly compensation will fall short if you push through
your needs. What will you do?
Answer: It is a situation of financial scarcity, where the individual has limited financial resources to fulfil
their basic job requirements, due the limited compensation of the job, the individual is not in the condition
to purchase a motorcycle by paying the price in a lump sum amount to the seller. Hence, I should take
into consideration the following options available with me, to purchase a motorcycle: a) equated monthly
Instalments options available with the automobile dealers, where I can easily reduce the financial burden
into small monthly instalments ranging from 6 to 36 months; b) short term bank credit with lower interest
rates to purchase a motorcycle for daily commute; c) purchase a motorcycle on half price than the current
market prices; and d) ask for salary in advance from the employer, which will allow me purchase a
motorcycle without facing any financial difficulties and higher interest rates on loans.