Applied Mathematics Departmental Midterm Exam; AGSB Auditorium; June 21,

2014; 6 pm 8 pm
Write your complete solutions and answers on yellow pad. You may use
your notes, books, laptops and calculators. Use of internet, email, or cell
phone is not allowed. Kindly return the problem sheet together with your
answer sheet.
1. A loan of Php 500,000 is due 5 years from today. (a) The borrower wants to make
annual deposits at the end of each year into a sinking fund that will earn interest at
an annual rate of 8%, compounded monthly. How much will the annual deposits
have to be? (b) If the interest is 6% per year, compounded quarterly, how much will
the annual deposits have to be?
2. You buy a second hand BMW car for Php 945,000 from a local bank summer sale.
The bank asks for a 20% down payment, with the remaining amount payable in
equal quarterly payments in the next four years. The interest rate is 9.7% per year,
compounded monthly. After paying the quarterly amounts for one year, you decide
to pay off the current loan by getting a new loan from another bank. The new loan
would be paid in equal quarterly amounts for a period of five years. If the interest
rate of the new loan is 7.2% per year, compounded quarterly, how much would be
your new quarterly payments?
3. Should Pedro buy a lot he believes will be worth Php 1,500,000 at the end of 10
years? He sees that the annual interest rate on this investment will be 10%
compounded annually for the first five years, and 7% compounded annually for the
last five years. The owners are asking for Php 650,000 for this lot.
4. You wish to have a million pesos fifteen years from now. Two banks in your
neighborhood invite you to make regular deposits of equal amounts of money every
start of the year, for fifteen years. The first bank, BC Bank, offers an interest rate of
5.05% per year, compounded semi-annually. As a new depositor, you will be entitled
to a Php 70,000 cash gift upon making your first deposit. The second bank, DE
Bank, offers an interest of 6.03% per year, compounded quarterly. To which bank
should you make your deposits, and how much should be your annual deposits?
5. Juans Cafe charges Php 80 per cup of coffee. The variable cost per cup is Php 50
while the total monthly fixed cost is Php 60,000. (a) Find the monthly break even
quantity. (b) If the cafe targets a monthly profit of Php 15,000 how many cups of
coffee must be served? (c) The caf wants to add a sandwich to their menu. As a
start, they expect to sell 600 sandwiches monthly, in addition to their forecast of
2,400 cups of coffee. The sandwich will be priced at Php 120 each and is estimated
to have a variable cost ratio of 60%. The total monthly fixed cost however would
increase to Php 90,000. Find the resulting break even quantities, as well as the
resulting profit for the month. Is it a good idea to add the sandwich to their menu?

Applied Mathematics Departmental Midterm Exam; AGSB Auditorium; June 21,

2014; 6 pm 8 pm
6. You want your son to have enough money by his 17th birthday to pay for his
college education. You want him to be able to withdraw Php 80,000 each time on his
18th, 19th, 20th, and 21st birthdays. You deposit equal amounts of money every
year, starting from his 5th birthday up to his 16th birthday. How much would be
your annual deposits? Assume interest rate is 9.4% per year, compounded monthly.
7. A man lends Php 4,500 for 5 years at 12.0% per year simple interest. At the end
of the 5 years, he invests the total amount with interest for another 9 years at 8.2%
interest per year, compounded monthly. How much money will he have at the end
of the 14- year period?