Eng Economics

Module 1

Interest borrow money from thebank

rent
coast of money simple Interest
D principal
1 Pn I n period
1W 1100 us 1210
I interestrate

ex we borrowed 300
n 5 months Future in 5months Pt 1
I Rt annually a month 3000 150

I 3M XT2 X 12 1
3150.002
150 W

cashflow
Diagram
Example what isthe future worth of 60.000
invested for 81 in 3 years
n
o

up F Pt I
60,00 t 60WO X 3 X 0.08
F 74,400 W
I 14,400.00
ordinary Interest period lyear 360days
Imonth 30days

A man borrowed money from a financing institution amounting to 10,000

Heborrowed on Oct 2020 and will expire on December 2023Howmuch
is the future worth at the end it the interest period assume 71 inheres
perannum

Given P 100.000 I Pnr

n 3years amonth 100 Wo 34 07
r 71 perannum
22166 67

F PTI
IN WO t 22,166.67
17122,166 67
1
Exact Interest period ordinary year 365years
leap year 366year divisibleby4

0
October 3 1 100,00 3.25 0.07
NOV 30 22750 00
Dec 31 F IN NO t22,750 W
2021 1yr 221750.00
2022 yr 36months logsday

IEIYI.am
tsyn
3.25 years
At the end it 2024 how much is the to be paid by theman

F 122,750 8592.5 131342.5

122,750

method it compounding
compounding interest annually I yr
semi annually 2
P I n f
Quarterly 4
100 r 5 1 ios
Bi mostly 6
105 8 5 2
monthly 12
weekly 48
Daily 360 ordinary year
365 exactordinaryyear
366 Leapyear

EngEcon By Sta Maria

Acertain lady invested an amount at 150 on to a bank that willearn
81 compounded semi annually How much would be her money at it
the end of 5 yrs

Given F PAti
N
P no no 150 no it f
r 81
n 2 150,00 1 0
1245
Not 222,036.642
15

compounding compounding period

m n number ofyears
F p Iti m number it interest period peryear
Example A man nowowed from a financing institution an
amount of Flw ow with an interest of 101 semi annual
both parties that the loan shall paid in 5 yr what is the
future worth at theat the agreed period

Given
P 100,0 n m
n 5 F p i ti
5
m 2 semi annually Iw w it E
re 101
162,889 46
i Im 1021 51
F

Example A man borrowed from a financing institution an anoun

of FIN ON with an interest it 101 semi annually both parties
agreed that loanshall be paid in 5 yrs At the end it theagreed
period a man was unableto settle theprincipal with the inter
Forconsideration thefinancing institution extended the loan
period up to tenyrs with a new interest of 101 quarterly
What is the amountof money to bepaid at the end it to
ya
P 100,0 n m
n 5 F p i ti
5
m 2 semi annually Iw w it E
re 101
162,889 46
i Im 1021 51
F Given I
P 162,889.46 F 162,889.46 11 0 0,25754
M 4
n 10 208,830.3524 or 266,913.35
r 101 Given 2
i Em 194 0.025

Annuity
OrdinaryAnnuity

Principal
tinm
Future worth
rate it interestper period
p.AE
I
M compounding period peryear
n number it years n

A number paymentsperyear
ordinary annuity
itiatif y
Example A certain company deposited anequal amount of 10,00 per
monthfor a periodof 20yrs at 8percent interest How
muchis the amount tobe withdrawnat the endit20yd
cashflowdiagram

I 23 240 F A flltiy.my

FE how
to.no
1t0II
Given
A 10no uniformpayment
i Im I
n 20
m 12permonth F 5,890,204.16

8 008
An investor wanted to have an amount 1,500.000 at the
end it to ya How much is uniform amount to be deposited
monthly Assume that the rate of interest is 7

F l no no
n toyrs
F a
flitoyny
M 12 A
r 71
gtÉ

17,1
01
i 5
A 157 8666.27

A student save 200 a day monthly invested the savings at 71

interest How much is the investment worth at theend it 5 yrs

A 200 20 4no F A
5days X 4Th flitotty
ut
aw
i
if
nm 286,371.61

Deferred Annuity

tht
nm

fitbit ti p a iti
I Engr Velascodecided to subscribe in a globe promowhich mustpaid ow
permonthfor 5yrs However thepayment will start 3yrsafterfrom
today If thepayment is 81 compound monthly How muchisthe value
of themoney today
OTB B 17
A low P u v v
n 5yrs
A Ye

Itn
Mi 12
D 3 yr D low
no

PPT9,318 43
D
Py F Iti 36
49318.43 11
0
1
588826 16 Present

2 Youare to pay a bill in Meralco everymonthfor 5yrs Theaccumulate

amountof the payment youpaid 60 ow at a rate of 61 peryear
Thefirstpayment is done after a yr How much are you paying every
payment
F
n 5yrs 8 6
AHEM 8
60.00 m 12 60000
9 8,4
741
7

ÉÉEE IÉ
1 Determine the exact interest it the borrowed money
amounting to 80,000.00 The loan was released in Jan
28,2004 9 it will mature on Oct 152009 the agreed
interest rate was 121
2004 leap 2009 ordinary 365
Jan 3 Jan 31
pep aa
33661 t t t t t t t t t
a Feb 28
Mar bl Mar 31
Apr 30 N 470.9270 789 Apr 30
May 31 5.71 May 31
June 30 June 30
July 31 I PN r July 31
Aug 31 80.00 5.71 0.12 Aug 31
Sept 30 54816 Sept 30
Oct 31 out
NOV 30 1g
Decide
338

2 Theexactsimpleinterest agreement for a loan amounting to

20.00.00 at 121 interest rate for 5yrs but attheend of the
agreed period the borrowed was unable to pay theduo amount
The leading company instituted a new agreement with the
borrower the loan was extended by 2 years
6months for
an interest rateof 12 compounded quarterly Determine
the amount to be paid at the end of the period of
extension
 D 20.00.00 F PtI
I 121 20,01 20.00 5 0.12
N 5 years 32 000
P 32,00 Iti mE 5 4
32 No tog
43,005.32

3 Marie invested X amount for 10months at 121 simple ordinary

interest at the end it the period it investment she withdrawn
herinvestment total amount she received was 100 ooo 00
She invested the whole amount it 100,000 for 121 compounded
semi annually for 5yrs Howmuch the amount of Xsheinvested
and thefuture amount of her investment after 5yrs 10months

nm
F too on
N 42
F Pt Pnl
100.00 P It n I
F pl w ti
0 512
100 it
I 121 P 1
179,084 77
1

Tigon
90.909.09

4 Allan is
earning 35,000.00 each month I hesaved 151 if
his income After 15yrs ofsavings he decided to invest his
money for 101 compounded quarterly 3 the investment is
good for 5yrs Determine the amount it Allan's investment
at theend of his investment period
P O 15 35 W 15 12 945,000
514
F 945,00 1 t
4 1,548,492.54

5 A man invested 10 ooo per month for loyrs at an interest

A 71 Hewanted to withdraw an equal amount per
month for 10yrs until the investment is exhausted Calculate
a total amount invested at the end of 10yrs
b amount of money withdrawn per month

a F a
th b p A
ft
A
Ijm
10 no
J
1730848 07
20096.61
Annuity Due one wherepayments are made at the beginning
it each period

Formulas P Ata Ea it n t

P A it it n i Eiti
F AKE it ht 1 A
BAY
F A Ea it nti 1
nerd

A man bought an equipment costing 60,00 payable in 12quarterly

payments each installment payable at the beginning of each period
Therate it interest is 241 compounded quartely What is the amount
eachpayment

p 60 on P Ata Eth
N 3
m 4
a fit tattie

12

6393.97
Ayoung woman 22yearsold has just graduated fromcollege She
accept a goodjob desires to establish her own retirement fund
At theend of each yeartherefor she plans to deposit 2,000.00
in a fund at 15 annual interest How old willshe be when the
has an accumulated value of 1,000,000 00

A
F
2,000.00
1,000,000.00 85151
1,000,00011

1 1 Hons
8880 0 15
F
AMMI
76 I ISIN
Log76 Nog lis

NYgi.tn
3H224Ns5
Amortization

A person amortize a house lot for year at selling price it

1 ow ow to be paid monthly at 61

period outstanding principal at interestducat principal repaid

the beginning a period end itperiod payment
at endofperiod
I 1 NO OW 5,000 86,066.42 81,066.42
2 918,933.58 4,594.67 86,066.42 81,471.75
3 837,516.88 4187.58 86,066.42 81.818.84
4 755,698.04 3778.49 86,066.42 82,287.93
5 673,410.11 3367.05 86,066.42 82.699.37
6 590,710.74 2953.55 86.066.42 83,112.87
7 507,597.87 2537.99 86,066.42 83,528.43
8 424,069 2120.35 86.066.42 83.946.07
9 340,122.93 1,700.61 86.066.42 84.365.86
10 255,757.16 1,278.79 86,066.42 84,787.63
11 170,969.49 85485 86,066.41 85,211.57
12 85,757.92 428.79 86106642 85,637.63

0
outstanding principal repaid i 0.005
outstanding principal x interest
payment interest due
A 86,066.42
Acompany purchased a car amounting to 1,700,000 payable in
5yearstobe paid quarterly at 81 compounded quarterly
Calculate forquarterly payment provid a table for the amortization
schedule

A 6 0
i Off 0.02