1. Equal end-of-year payments of P2,638 each are being made on a P10,000 loan at 10% effective interest per year. a. How many payments are required to repay the entire loan? b. Immediately after the second payment, what lump-sum amount would completely pay off the loan? 2. A contract has been signed to lease a building at P360,000 per year with an annual increase of P3,000 for 10 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%. What lump-sum paid today would be equivalent to the ten-year lease payment plan?
1. Equal end-of-year payments of P2,638 each are being made on a P10,000 loan at 10% effective interest per year. a. How many payments are required to repay the entire loan? b. Immediately after the second payment, what lump-sum amount would completely pay off the loan? 2. A contract has been signed to lease a building at P360,000 per year with an annual increase of P3,000 for 10 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%. What lump-sum paid today would be equivalent to the ten-year lease payment plan?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:SOLVE THE FOLLOWING PROBLEMS CLEARLY AND NEATLY. DRAW THE
CORRECT CASH FLOW DIAGRAM.
1. Equal end-of-year payments of P2,638 each are being made on a P10,000 loan at 10%
effective interest per year.
a. How many payments are required to repay the entire loan?
b. Immediately after the second payment, what lump-sum amount would completely pay
off the
loan?
2. A contract has been signed to lease a building at P360,000 per year with an annual increase
of P3,000 for 10 years. Payments are to be made at the end of each year, starting one
year from now. The prevailing interest rate is 7%. What lump-sum paid today would be
equivalent to the ten-year lease payment plan?
3. (a) How long will it take money to triple itself if invested at 8% annual simple interest?
At 8% compounded annually?
(b) An annuity of P1,200 is required over 10 years to obtain a future amount of P16,000.
What is the effective interest rate?
4. A fully secured loan of P30,000 was to be amortized by 10 equal semi-annual payments,
the first payment to be made 6 months after the loan finalization. After the 6th payment
was made the debtor was in a position to settle the entire debt balance by a single
payment on that date. If the interest on the loan is 12% compounded semi-annually, what
will be the amount of the single-payment?
5. Suppose a geometric gradient begins with $1,000 at the end of year one and decreases by
20% per year after the first year. Determine P, A, and F. The interest rate is 25% per
year. N= 4years.
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