EE40 Homework 1
Simple Interest
1. If you borrowed from your friend with simple interest of 12%, find the present worth of
Php20,000, which is due at the end of 9 months.
Answer: Php18,348.62
2. Determine the ordinary and exact simple interests on Php5,000 for the period from January 15
to June 20, 1993, if the rate of simple interest is 14%.
Answer: Ordinary = Php301.39, Exact = Php299.18
3. Php4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at
the end of 75 days?
Answer: Php 4,133.33
4. Determine the exact and ordinary interests on Php1,200 for the period from January 16 to
November 26, 1992, if the rate of interest is 24%.
Answer: Exact = Php 247.87, Ordinary = Php248.00
5. What will be the future worth of money after 12 months, if the sum of Php25,000 invested
today at simple interest rate of 1% per month?
Answer: Php28,000
Compound Interest
1. How long will it take for money to triple itself if invested at 8% compounded annually?
Answer: 14.27
2. The sum of Php26,000 was deposited in a fund earning interest at 8% annum compounded
quarterly. What is the principal at the end of 3 years?
Answer: Php32,974.29
3. Accumulate Php3,000 for 9 years at 6% compounded quarterly. What is the compound interest
earned?
Answer: Php2,127.42
4. At a certain interest rate compounded quarterly, Php1,000 will amount to Php4,500 in 15 years.
What is the amount at the end of 10 years?
Answer: Php2,726.68
5. RCBC advertises 9.5% account that yields 9.84% annually. Find how often the interest is
compounded.
Answer: Quarterly
6. Determine the effective interest rate of Php1.00 for one year compounded semi-annually at the
nominal rate of 6%.
Answer: 6.09%
7. If Php1,000 becomes Php1,126.29 after 4 years when invested at a certain nominal rate of
interest compounded semi-annually, determine the nominal rate and the corresponding
effective rate.
Answer: Nominal = 3% comp semi-annually, Effective = 3.02%
8. What is the corresponding effective rate of 18% compounded semi-quarterly?
Answer: 19.48%
Discrete Payments
1. On his sixth birthday, a boy is left an inheritance. The inheritance will be paid in lump sum of
Php10,000 on his 21st birthday. What is the present value of the inheritance as of the boy’s sixth
birthday, if the interest is 4% compounded annually?
Answer: Php5,552,65
2. A machine worth Php50,000 is expected to last for 3 years. During its operation, a maintenance
cost of Php1,000 is needed after the 1st year of operation and Php2,000 at the end of the 2nd
year. What present amount of money is required to operate the machine, if money is worth 16%
compounded quarterly?
Answer: Php52,315.28
3. The expansion plan of a business firm requires the purchase of a parcel of land on which to build
a structure, which they will need 5 years hence. The current costs are: land, Php1,000,000;
building PhP3,500,000. Since these are not needed immediately, the firm plans to defer the
purchase of the land and the construction of the building until they are needed. If the value of
the land and the cost of the building are expected to appreciate at the rates of 20% and 8% per
annum, respectively, what will be the total cost of the land and structure 5 years hence?
Answer: Php 7,630,968.35
Continuous Interest
1. What is the value of Php100,000 after 8 years if money is worth 3% compounded continuously?
Answer: P 127,124.92
2. How long does it take Php100,000 to earn Php5,000 interest if money is worth 8% compounded
continuously?
Answer: 0.61 years
3. What is the continuous compounding interest rate applied to Php200,000 that will become
Php350,000 in 20 years?
Answer: 2.8%
4. What is the future amount of Php35,000 after 8 years if money is worth 7% compounded
continuously?
Answer: P 61,273.54
5. A man borrows Php10,000 from a loan firm. The rate of simple interest is 15%, but the interest
is to be deducted from the loan at the time the money is borrowed. At the end of one year he
has to pay back Php10,000. What is the actual rate of interest?
Answer: 17.65%
6. A bank charges 12% simple interest on a Php300 loan. How much will be repaid if the loan is
paid back in one lump sum after 3 years?
Answer: P 408.00