Prob 1 Computation of Future Values and Present Values
Using the appropriate interest table, answer each of the following
questions. (Each case is independent of the others.)
(a)
What is the future value of P7,000 at the end of 5 period at 8% compound
interest?
(b) What is the present value of P7,000 due 8 periods hence, discounted at 6%?
What is the future value of 15 periodic payments of P7,000 each made at the end
(c) of each period and compounded at 10%?
What is the present value of P7,000 to be received at the end of each of 20
(d) periods, discounted at 5% compound interest?
Prob 2 Computation of Future Values and Present Values
Using the appropriate interest table, answer each of the following
questions. (Each case is independent of the others.)
What is the future value of 20 periodic payments ofP4,000 each made at the
(a) beginning of each period and compounded at 8%?
What is the present value of P2,500 to be received at the beginning of each of 30
(b) periods, discounted at 5% compound interest?
What is the future value of 15 deposits of P2,000 each made at the beginning of
(c) each period and compounded at 10%
What is the present value of six receipts of P1,000 each received at the beginning
(d) of each period, discounted at 9% compounded interest?
Prob 3 Computation of Present Values
Using the appropriate interest table, compute the present values of the following
periodic amounts due at the end of the designated periods.
(a) P30,000 receivable at the end of each period for 8 periods compounded at 12%?
(b) P30,000 payments to be made at the end of each period for 16 periods at 9%?
(c) P30,000 payable at the end of the sevent, eight, night and tenth periods at 12%
Prob 4 Future Value and Present Value Problems
(a)
Dwayne Wade Company recently signed a lease for a new office building, for a
lease period of 10 years. Under the lease agreement, a security deposit of
P12,000 is made, with the deposit to be returned at the expiration of the lease,
with interest compounded at 5% per year. What amount will the company receive
at the time the lease expires?
Sevena Wiliams Corporation, having recently issued a P20 million, 15-year bond
issue, is committed to make annual sinking fund deposits of P600,000. The
deposits are made on the last day of each year and yield a return of 10%. Will the
fund at the end of 15 years be sufficient to retire the bonds? If not, what will the
(b) deficiency be?
(c)
Under the terms of his salary agreement, president Rex Walters has an option of
receiving either an immediate bonus of P55,000, or a deferred bonus of P70,000
payable in 10 years. Ignoring tax considerations and assuming a relevant interest
rate of 4%, which form of settlement should Walters accepts?
Prob 5 Computation of a Retirement Fund
Clarence Weatherspoon, a super salesman contemplating retirement on his
fifty-fith birthday, decides to create a fund on a 8% basis that will enable him to
withdraw P20,000 per year on June 30, beginning in 2021 and continuing through
2024. To develop this fund, Clarence intends to make equal conttribution on June 30
of each of the years 2017-2020.
Instruction:
(a) How much must the balance of the fund equal on June 30, 2020, in order for
Clarence to satisfy his objective?
(b) What are each of Clarence's contribution to the fund?
Prob 6 Unknown Rate
LEW Company purchased a machine at a price of P100,000 by signing a note payable,
which requires a single payment of P123,210 in 2 years. Assuming annual
compounding
of interest, what rate of interest is being paid on the loan?
Prob 7 Unknown Periods and Unknown Interest Rate
Consider the following independent situations.
(a) Mike Finley wishes to become a millionaire. His money market fund has a
balance of P92,296 and has a guaranteed interest rate of 10%. How many years
must Mike leave that balance in the fund in oder to get his desired P1 million?
(b) Assume that Sally Williams desires to accumulate P1 million in 15 years using
her money market fund balance of P182,696. At what interest rate must Sally's
investment compound annually?
Prob 8 Evaluation of Purchase Options
Sosa Excavating Inc is purchasing a bulldozer. The equipment has a price of P100,000.
The manufacturer has offered a payment plan that would allow Sosa to make 10 equal
annual payments of P16,274.53, with the first payment due one year after the
purchase.
(a) How much total interest will Sosa pay on this payment plan?
(b) Sosa could borrow P100,000 from it's bank to finance the purchase at an annual
rate of 9%. Should Sosa borrow from the bank or use the manufacturer's payment
plan to pay for the equipment?