SOME PROBLEMS IN TIME VALUE OF MONEY

1. FIND THE PRESENT VALUE OF THE FOLLOWING

ASSET AMOUNT RATE YEARS FREQUENCY PV

OF
DISCOUNTING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

SOLUTION:
A. P1,000 x (1.12 / / = =) P797.20

B. P1000 x (1.06 / / = = = =) P792.10

C. P1000 x (1.03 / / = = = = = = = =) P789.40

D. P1000 x (1.01/ / = = = = = = = = = = = = = = = = = = = = = = = = ) P787.60

LEGENDS: / - PRESS DIVIDED BY FUNCTION IN THE CALCULATOR

= - PRESS EQUAL SIGN IN THE CALCULATOR
2. FIND THE FUTURE VALUE OF THE FOLLOWING

ASSET AMOUNT RATE YEARS FREQUENCY FV

OF
COMPOUNDING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

A. P1,000 X (1.12 X X = ) P1,254.40

B. P 1,000 X ( 1.06 X X = = = ) P1,262.48

C. P1,000 X (1.03 X X = = = = = = = ) P1,266.77

D. P1,000 X (1.01 X X = = = = = = = = = = = = = = = = = = = = = = =) P1,269.73

LEGEND

X – PRESS THE MULTIPLY FUNCTION IN THE CALCULATOR

= - PRESS THE EQUALS SIGN FUNCTION IN THE CALCULATOR
3. FIND THE PRESENT VALUE OF THE ORDINARY ANNUITY

ASSET AMOUNT RATE YEARS FREQUENCY PVOA

OF
DISCOUNTING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

FORMULA = 1 – (1 + R) ^-N
R

FOR THIS FORMULA , EXECUTE FIRST THE (1 + R) ^ -N. THIS IS SIMILAR WITH
HOW THE PRESENT VALUE FACTOR IS COMPUTED

A. P1,000 X (PVIFA FORMULA BASED = R = 12 PERCENT) = P1,690.05

B. P1,000 X (PVIFA FORMULA BASED = R = 6 PERCENT) = P 3,465.10

C. P1,000 (PVIFA FORMULA BASED = R = 3 PERCENT ) = P 7,019.69

D. P1,000 (PVIFA FORMULA BASED = R = 1 PERCENT) = P21,243.38

4. FIND THE PRESENT VALUE OF THE ANNUITY DUE

ASSET AMOUNT RATE YEARS FREQUENCY PVAD

OF
DISCOUNTING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

FOR ANNUITY DUE, MULTIPLY BY 1 + R THE RESULT IN THE ORDINARY

ANNUITY

A. P1,690.05 X 1.12 = P1,892.86

B. P3,465.10 X 1.06 = P3,673.01

C. P 7,019.60 X 1.03 = P7,230.28

D. P 21,243.38 X 1.01 = P21,455.52

5. FIND THE FUTURE VALUE OF THE ORDINARY ANNUITY

ASSET AMOUNT RATE YEARS FREQUENCY FVOA

OF
DISCOUNTING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

FORMULA = (1 + R) ^N - 1
R

FOR THIS FORMULA , EXECUTE FIRST THE (1 + R) ^ N. THIS IS SIMILAR WITH

HOW THE PRESENT VALUE FACTOR IS COMPUTED

A. P1,000 X (FVIFA FORMULA BASED = R = 12 PERCENT) = P2,120.00

B. P1,000 X ( FVIFA FORMULA BASED = R = 6 PERCENT) = P4,374.62

C. P1,000 ( FVIFA FORMULA BASED = R = 3 PERCENT ) = P8,892.34

D. P1,000 (FVIFA FORMULA BASED = R = 1 PERCENT) = P26,973.50

6. FIND THE FUTURE VALUE OF THE ANNUITY DUE

ASSET AMOUNT RATE YEARS FREQUENCY FVAD

OF
DISCOUNTING
A P1,000 12% 2 ANNUALLY
B P1,000 12% 2 SEMI ANNUAL
C P1,000 12% 2 QUARTERLY
D P1,000 12% 2 MONTHLY

FOR ANNUITY DUE, MULTIPLY BY 1 + R THE RESULT IN THE ORDINARY

ANNUITY

A. P2,120.00 X 1.12 = P2,374.40

B. P4,374.62 X 1.06 = P4,637.10

C. P8,892.34 X 1.03 = P9,159.11

D. P26,973.50 X 1.01 = P27,243.24