Michael is planning to apply for a loan in Quezon Cooperative Bank, he is already aware of the terms payment for his loan but when he is about to pass his application form and compare his computation with the terms of payment provided by the bank he notices some discrepancy. Michael's Computation Computation from the bank Amount of Loan: P100,000 Amount of Loan: P100,000 Interest rate: 3% Interest rate: 3% Due Date: After 3 years Year 2 6090 Year 3 9272.70 Year 1 Computation: I = (100, 000)(0.03(3) I = P9,000 Amount to be paid after 3 years Int 3000 %3D Amt 103,000 106,090 109,272.70 %3! P109,000 To enlighten he asked some explanations why they have different computations and the bank gave him the detailed computation: Initially at t = 0 P100,000 P100,000 (1.03) = P103,000 P103,000 (1.03) = P106,090 P106,090 (1.03) = P109,272.70 at t = 1 %3! at t = 2 at t = 3 Questions 1. Is Michael's computation correct? 2. Is the bank's computation fair? Why? 3. How much is the difference in the total amount to be paid betwe Michael's computation and the bank's computation? 4. Why do you think the bank's computation yielded more interest? 5. Do you think the bank committed an error in the computation of amount to be paid?
Michael is planning to apply for a loan in Quezon Cooperative Bank, he is already aware of the terms payment for his loan but when he is about to pass his application form and compare his computation with the terms of payment provided by the bank he notices some discrepancy. Michael's Computation Computation from the bank Amount of Loan: P100,000 Amount of Loan: P100,000 Interest rate: 3% Interest rate: 3% Due Date: After 3 years Year 2 6090 Year 3 9272.70 Year 1 Computation: I = (100, 000)(0.03(3) I = P9,000 Amount to be paid after 3 years Int 3000 %3D Amt 103,000 106,090 109,272.70 %3! P109,000 To enlighten he asked some explanations why they have different computations and the bank gave him the detailed computation: Initially at t = 0 P100,000 P100,000 (1.03) = P103,000 P103,000 (1.03) = P106,090 P106,090 (1.03) = P109,272.70 at t = 1 %3! at t = 2 at t = 3 Questions 1. Is Michael's computation correct? 2. Is the bank's computation fair? Why? 3. How much is the difference in the total amount to be paid betwe Michael's computation and the bank's computation? 4. Why do you think the bank's computation yielded more interest? 5. Do you think the bank committed an error in the computation of amount to be paid?
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
Related questions
Question
Transcribed Image Text:What's New
ur
Read and analyze the situation below.
Let's Save
Michael is planning to apply for a loan in Quezon Cooperative Bank, he is already
aware of the terms payment for his loan but when he is about to pass his
application form and compare his computation with the terms of payment
provided by the bank he notices some discrepancy.
Michael's Computation
Computation from the bank
Amount of Loan: P100,000
Interest rate: 3%
Amount of Loan: P100,000
Interest rate: 3%
Due Date: After 3 years
Computation:
I = (100, 000)(0.03(3)
Year 1
Year 2
Year 3
9272.70
eco
Amt
0609
109,272.70
060'901
Int
0008
Amount to be paid after 3 years
o C ag 000'6d = I
000'60I
To enlighten he asked some explanations why they have different computations
and the bank gave him the detailed computation:
Initially at t = 0
000'00
P100,000 (1.03) = P103,000
P103,000 (1.03) = P106,090
P106,090 (1.03) = P109,272.70
at t = 1
at t = 2
at t = 3
Questions
1. Is Michael's computation correct?
2. Is the bank's computation fair? Why?
3. How much is the difference in the total amount to be paid between
Michael's computation and the bank's computation?
4. Why do you think the bank's computation yielded more interest?
5. Do you think the bank committed an error in the computation of the
amount to be paid?
Transcribed Image Text:6. If the term of payment will be longer what do you think will happen
between the difference of the amount to be paid in Michael's computation
and the bank's computation?
7. If vou are Michael and you follow the computation made by the bank do
Ou think there is a way to lessen the amount to be paid at the end of 3
years? How?
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