Part II

1.
a. P = I/rt
P = 65,625 / (0.15 x 7)
P = P62,500

b. r = I/Pt
r = 40 / (500 x 2.5)
r = 3.2%

c. t = I/Pr
t = 375 / (1,250 x .05)
t = 6 years

d. I = Prt
I = 900 x .095 x 1.5
I = P128.25

2.
(a) Exact Interest
I = Prt
I = 2,200 x .07 x (100/365)
I = 42.19

(b) Ordinary Interest

 I = Prt
I = 2,200 x .07 x (100/360)
I = 42.78

(c) Banker’s Rule

I = Prt
I = 2,200 x .07 x (100/360)
I = 42.78

3. (Discount Loan) A businessman obtained 50,000 pesos discounted loan for 3 years at 6%
simple interest.

(a) Find the discount.

D = Mrt

D = 50,000 x .06 x 3

D = P9,000

(b) Find the amount of money received by the businessman

P=M–D
P = 50,000 – 9,000
P = P41,000

(c) Find the true interest rate.

reff = r / (1 – rt)
reff = .06 / [1 – (.06 x 3)]
reff = .06 / (1 - .18)
 reff = .06 / 0.82
reff = 7.31%

4.

1st Loan:

A = P[1+0.05(t)]

A = P[1+0.05(6)]

A = P(1.3)

A = 1.3P

2nd Loan:

A = P[1+0.06(t)]

A = P[1+0.06(5)]

A = P(1.3)

A = 1.3P

Answer: They have the same future value and Yes, it will depend on the principal
amount. They will have the same future value if they have the same principal amount.

5.
a) A = P [1 + (r / n)] ^nt

= 825 [1 + (.04 / 1)] ^1(10)

= 825 (1 + .04)^10

= 825 (1.04)^10
= 825 x 1.4802442849

= P1,221.20

b) A = P [1 + (r / n)] ^nt

= 3,250 [1 + (.02 / 2)]^2(5)

= 3,250 (1 + .01)^10

= 3,250 (1.01)^10

= 3,250 x 1.1046221254

= P3,590.02

c. A = P [1 + (r / n)] ^nt

= 625 [1 + (.08 / 4)]^4(12)

= 625 (1 + .02)^48

= 625 (1.02)^48

= 625 x 2.5870703855

= P1,616.92

d) A = P [1 + (r / n)] ^nt

= 750 [1 + (.03 / 12)]^12(1)

= 750 (1 + .0025)^12

= 750 (1.0025)^12

= 750 x 1.0304159569

= P772.81
6. FV= P [1 + (r/n)]^nt

FV = 500 [1 + (.05 / 4)]^4(20)

= 500 (1 + .0125)^80

= 500 (1.0125)^80

= 500 x 2.7014849408

= P1,350.74

7. Down payment = 725,000 x .10

= 72,500
Balance =725,000 – 72,500 = 652,500
Monthly Payment = [652,500 (1 + .0635)] / (12 x 27)
= 693,933.75 / 324
Monthly Payment = P2141.77

8.
a. 25% down payment
180,000 (1 - .25)
180,000 (.75) = 135,000
Interest:
135,000 x 20 x .09 = 243,000

b. 10% down payment

180,000 (1 - .10)
180,000 (.9) = 162,000

Interest:
162,000 x 25 x .07 = 283,500
243,000 < 283,500

Answer: 25% down payment is better