HOMEWORK # 2
INFLATION, EFFECTIVE RATES and ANNUITIES
NAME: ______________________________________
YEAR AND BLOCK: _______________ GRADE: ______
INSTRUCTION: Select the correct answer for each of the following
questions. Write your solution on the space provided below.
4. What quarterly payment is required over 15 years to equate
with a future amount Php 150,000? Assume interest rate of 6%
compounded continuously.
A. Php 1421
C. Php 1673
B. Php 1553
D. Php 1332
Solution:
1. A man invested Php 130,000 at an interest rate of 10%
compounded annually. What will be the final amount of his
investments, in terms of today’s pesos, after 5 years, if inflation
remains the same at the rate of 8% per year?
A. Php 196,324
C. Php 209,366
B. Php 154,785
D. Php 142,491
Solution:
5. A certain nominal annual interest rate has an effective rate of
19.722 % when compounded continuously. What is its effective
rate if compounded bi-monthly?
A. 19.87%
C. 18.00%
B. 18.45%
D. 19.41%
Solution:
2. What is the amount after 10 years of an Php 18,000 deposit
if it earns 8% compounded quarterly for the first 5 years and
12% compounded monthly for the next 5 years?
A. Php 42,536
C. Php 52,362
B. Php 38,652
D. Php 48,591
Solution:
6. A piece of equipment can be bought for Php 100,000 cash or
for Php 30,000 down payment and a yearly payment of Php
12,000 for 15 years. What is the annual interest rate for the time
payments?
A. 12.33%
C. 14.32%
B. 15.98%
D. 15.05%
Solution:
3. Php 3000 quarterly for ten years accumulates to Php
181,205.95. Find the nominal rate of interest compounded
quarterly.
A. 6 %
C. 8%
B. 10 %
D. 2 %
Solution:
7. What is the uninflated present worth of a Php 200,000 future
value in two years if the average inflation rate is 6% and interest
rate is 10%.
A. Php 215,379
C. Php 147,107
B. Php 165,254
D. Php 187,321
Solution:
Solution:
8. Dan Lester borrowed Php 500,000 at an interest rate of 18%
compounded monthly. Monthly payments of Php 12,968.31 are
agreed upon. The length of the loan in months is closest to:
A. 64
C. 40
B. 58
D. 52
Solution:
Situation [9-11] – An endowment fund is to provide an annual
scholarship of Php 40,000 for the first five years, Php 60,000 for
the next 5 years, Php 90,000 thereafter. The fund will be
established 1 year before the first scholarship is awarded. The
fund earns 4 ½ % interest.
9. What sum of money must be deposited now?
A. Php 1,852,321
C. Php 1,458,214
B. Php 1,674,819
D. Php 2,025,241
10. What is the amount left in the fund after the fifth Php 40,000
was withdrawn?
A. Php 1,868,301
C. Php 1,826,125
B. Php 1,892,374
D. Php 1,325,125
11. What is the amount left in the fund after the fourth Php
60,000 was withdrawn?
A. Php 1,917,531
C. Php 1,943,820
B. Php 2,000,000
D. Php 1,971,292
_______________________________
Name and Signature