P = P50,000 j = 10% compounded quarterly, two years F = P 60,920.

14

Suppose we add another dimension to the three examples presented, that is,

1. Mr. Rocky Balboa promises to pay P50,000 to Bangko Real two years from date. Six months
before the maturity date, Bangko Real sold the note to Monte de Dias at 12%
compounded semi-annually.

2. Mr. Rocky Balboa promises to pay P50,000 to Bangko Real plus 10% simple interest two years
from due date. Six months before the maturity date, Bangko Real sold the ntoe to
Monte de Dias at 12% compounded semi-annually.

3. Mr. Dart Vader promises to pay P50,000 to Bangko Real plus interest at 10% compounded
quarterly two years from date. Six months before the maturity date, Bangko Real sold
the note to Monte de Dias at 12% compounded semi-annually.

Using the compound present value formula, we have the following:

Example 1

At compound interest

P=F ( 1+ⅈ )−n

= 50,000 ( 1+ .06 )−1
= P 47,169.81

P = P50,000 F = 50,000

Proceeds (12%, m=12)

P56,603.77

Example 2

At compound interest,

P=F ( 1+ⅈ )−n

= 60,000 ( 1+.06 )−1
= P56,603.77

P = P50,000 F = P60,000