PROBLEM - SET (3) - Economy

UNIVERSITY OF BATANGAS
COLLEGE OF ENGINEERING
MECHANICAL ENGINEERING DEPARTMENT
PLATE NO.1
SET OF PROBLEMS REGARDING MONEY AND INTEREST
FAMILY NAME, FIRST NAME M.I.

SN
SECTION
ENGR. GLENDA A. DE MESA

INSTRUCTOR
DATE SUBMITTED
PROBLEM SET2
SOLVE THE FOLLOWING COMPLETELY AND NEATLY. BOX YOUR FINAL ANSWER/S.
WRITE IN 8.5’’ BY 11’’ TYPEWRITING WITH 1” TBLR MARGIN, 4mm FOR WRITE UPS AND 1mm FOR
SPACES.
INCLUDE A 1CM BY 1CM BOX IN YOUR FRONT PAGE WITH THE NUMERATOR INDICATING THE
NUMBER OF ITEMS YOU HAVE ANSWERED AND THE DENOMINATOR OF 25.
1. A price tag of P1200 is payable in 60 days but if paid within 30 days it will have a 3% discount.
Find the rate of interest.
2. It is the practice of almost all bank in the Philippines that when they grant a loan, the interest
for one year is automatically deducted the principal upon release of money to a borrower.
Let us therefore assume that you applied for a loan with a bank and the P80, 000.00 was
approved at an interest rate of 14% of which P11, 200.00 was deducted and you were given a
check of P68, 800.00. Since you have to pay the amount of P80, 000.00 one year after, what
then will be the effective interest rate?
3. A man borrowed from a bank under a promissory note that he signed in the amount of P25,
000.00 for a period of one year. He received only the amount of P21, 915.00 after the bank
collected the advance interest and an additional amount of P85.00 for notarial and
inspection fees. What was the rate of interest that the bank collected in advance?
4. Mr. J. de la Cruz borrowed money from a bank. He received from the bank P1340.00 and
promised to pay P1500.00 at the end of 9 months. Determine the following:
a. Simple interest rate
b. The corresponding discount rate or often referred to as the “Bankers discounts”.
5. A bill for motorboat specifies the cost as P1200 due at the end of 100 days but offers a 4%
discount for cash in 30 days. What is the highest rate, simple interest at which the buyer can
afford to borrow money in order to take advantage of the discount?
6. Discount P1650 for 4 months at 6% simple interest. What is the discount?
7. If you borrowed P10, 000 from a bank with 18% interest per annum, what is the total amount
to be repaid at the end of one year?
8. A man borrowed P20, 000.00 from a local commercial bank which has a simple interest of 16%
but the interest is to be deducted from the loan at the time that the money was borrowed,
and the loan is payable at the end of one year. How much is the actual rate of interest?
9. How long will it take money to double itself if invested at 5% compounded annually?
10. In how many year is required for P2000 to increase if interest at 12% compounded semi-
annually?
11. Compute the equivalent rate of 15% compounded semi-annually to a rate compounded
quarterly.
12. A sum of P1000.00 is invested now and left for eight years, at which time the principal is
withdrawn. The interest has accrued is left for another eight years. If the effective annual
interest rate is 5%, what will be the withdrawal amount at the end of the 16 th year?
13. How many years will P100,000 earned a compound interest of P50,000 if the interest rate is
9% compounded quarterly?
14. P200,000 was deposited on Jan. 1, 1988 at an interest rate of 24% compounded semi-annually.
How much would be the sum be on Jan. 1, 1993?
15. Which method is better for you as an investor, to invest at 5% compounded semi-annually or
5% compounded monthly? Prove your answer.
16. A man borrows money from a bank which uses a simple discount rate of 14%. He signs a
promissory note promising to pay P500.00 per month at the end of 4 th, 6th and 7th months
respectively. Determine the amount of money that he received from the bank.
17. How long will it take P5.00 to be four times its value if invested at the rate of 7% compounded
semi-annually? What is the effective rate of interest?
18. Ten years ago the value of money is 120, 000 and now it is worth P179, 000. Compute the
value of the single payment amount factor.
19. Compute the nominal interest rate of a continuously compounded loan if the effective rate is
25%?
20. What is the nominal rate of interest compounded continuously for 10 years if the compound
amount factor is equal to 1.34986?
21. What is the nominal rate of interest compounded continuously for 8 years if the present
worth factor is equal to 0.6187835?
22. Compute the difference in the future amount of P500 compounded annually at nominal rate
of 5% and if it is compounded continuously for 5 years at the same rate.
23. Maintenance cost of an equipment is P20,000 for two years, P40,000 at the end of 4 years
and P80,000 at the end of 8 years. Compute for the semi annual amount that be set aside for
this equipment. Money worth 10% compounded annually.
24. A service car whose cash price was P540,000 was bought with a downpayment of P162,000
and monthly instalments of P10,874.29 for 5 years. What was the rate of interest if
compounded monthly?
25. A man wishes to purchase a set of appliances with a total cost of P20,000. He made a
downpayment of P5,000 and the balance payable in 24 equal monthly instalments. If
financing charge is 12% for each year computed on the total balance to be paid by installment
and interest rate is 12%. How much would each installment payment be? What will be the
actual cost of money?

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UNIVERSITY OF BATANGAS

FAMILY NAME, FIRST NAME M.I.

ENGR. GLENDA A. DE MESA

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