NAME: RONIEL JOSEPH PURCIA ASSIGNMENT 3

COURSE & SEC: BSCE – 2A BES4

PROFESSOR: ENGR. OTILIA TADUYO OCTOBER 7, 2021
BES 4 BSCE-2A Assignment4. Annuities 07 October 2021
P4-02 (C.E. Beard, November 1978)
The average annual cost of damages caused by floods to a certain subdivision located along the Pasig River
is estimated at P700,000. To build a gravity dam to protect the area from floods would cost
Php2,500,000.00 and would involve an annual cost of P20,000. With interest at 8% compounded annually,
how many years will takes for the dam to pay for itself?
𝐺𝑖𝑣𝑒𝑛:
𝐹 = 𝑃2,500,000
𝐴 = 𝑃700,000
𝑖 = 8%
Solution:
𝐴(1 − (1 + 𝑖 )−𝑛 )
𝐹=
𝑖
700,000(1 − (1 + 0.08)−𝑛 )
2,500,000 =
0.08
(2,500,000)(0.08) 700,000(1 − (1 + 0.08)−𝑛 )
=
700,000 700,000
( ) −𝑛
0.29 = 1 − 1 + 0.08
0.71 = 1.08−𝑛
log(0.71)
𝑛=
log(1.08)
𝑛 = 4.5 𝑦𝑒𝑎𝑟𝑠 𝑖𝑡 𝑤𝑖𝑙𝑙 𝑡𝑎𝑘𝑒 𝑡𝑜 𝑝𝑎𝑦 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑑𝑎𝑚.

P4.03 E.E. Board, April 1981)

A man wishes to have P35,000 when he retires 15 years from now. If he can expect to receive 4% annual
interest, how much must he set aside beginning at the end of each of the 15 years?
𝑮𝒊𝒗𝒆𝒏:
𝐹 = 𝑃35,000
𝑖 = 4%
𝑛 = 15
𝐴 =?
Solution:
(1 + 𝑖 )𝑛 − 1 0.04
𝐹 = 𝐴( ) 𝐴 = 𝑃35,000 ( )
𝑖 (1 + 0.04)15 − 1
𝑖
𝐴 = 𝐹( ) 𝐴 = 𝑃1747.94 𝑖𝑠 𝑡ℎ𝑒 𝑎𝑚𝑜𝑢𝑛𝑡 ℎ𝑒 𝑠ℎ𝑜𝑢𝑙𝑑 𝑠𝑒𝑡 𝑎𝑠𝑖𝑑𝑒.
(1 + 𝑖 )𝑛 − 1
P4-10 (ECE Board, August 1978 and September 1984)
A man purchases a computer worth P15.000 with interest at 5% payable semiannually. He signed a
contract to pay P5, 000 and the balance principal and interest included, by equal payments at the
end of each 6 months for 10 years. At the end of 4 years this computer was sold to yield the investor
7% payable semi-annually. Find the price he paid.
𝑮𝒊𝒗𝒆𝒏:
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡 = 𝑃15,000
𝐷𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = 𝑃5,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 2.5% 𝑜𝑟 0.025
𝑁 = 20 𝑦𝑒𝑎𝑟𝑠 𝑆𝑜𝑙𝑢𝑡𝑖𝑜𝑛:

𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡 − 𝑑𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡

= 15,000 − 5,000
= 𝑃10,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡(𝑖)(𝑛)
= 10,000(0.025)(20)
= 𝑃5,000
𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 = 𝑙𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑚𝑜𝑢𝑛𝑡
= 10,000 + 5,000
= 𝑃15,000
𝑡ℎ𝑒𝑛,
𝑖
𝐴 = 𝑃( )
(1 + 𝑖)𝑛 − 1
0.07
𝐴 = 750(8)(12) ( )
(1 + 0.07)8 − 1
𝐴 = 𝑃7,017.68 𝑡𝑜𝑡𝑎𝑙 𝑡ℎ𝑎𝑡 ℎ𝑒 𝑝𝑎𝑖𝑑

P4-11 (ECE BOARD, August 1979)

A man owes P10,000 with interest at 6% payable semi-annually. What equal payments at the beginning of
each 6 months for 8 years will discharge his debt?
𝑮𝒊𝒗𝒆𝒏:
𝑃 = 𝑃10,000
𝑖 = 6%
𝑛 = 16
𝐴 =?
𝑺𝒐𝒍𝒖𝒕𝒊𝒐𝒏:
1 − (1 + 𝑖 )−𝑛
𝑃 = 𝐴( )
𝑖
𝑖
𝐴 = 𝑃( )
1 − (1 + 𝑖 )−𝑛
0.06
𝐴 = 𝑃10,000 ( )
1 − (1 + 0.06)−16
𝐴 = 𝑃989.52 𝑖𝑠 𝑡ℎ𝑒 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑎𝑡 𝑡ℎ𝑒 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑜𝑓 𝑒𝑎𝑐ℎ 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑓𝑜𝑟 8 𝑦𝑒𝑎𝑟𝑠.