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Mathematics of Investment 3
Mathematics of Investment 3
Mathematics of Investment 3
[ ] [ ]
−𝑛
( 1+ ⅈ ) − 1 𝑛 1− ( 1+ ⅈ )
S¿𝑅 o and Aₒ=𝑅
ⅈ ⅈ
Where:
Sₒ = Sum of an ordinary annuity R = Regular, Period payment
Aₒ = Present Value
n = total number of conversion periods i = periodic rate
Example:
1. Mr. Dazkie Dumplingss deposit ₱3,500 every end of the month at
Philippine Ordinary Bank (POB) that credits 2.4% monthly for 6 months.
How much money does he have at the end of 6 months?
Given:
R = P3,500
j = 2.4% or .024
m = 12
t= 6 months
i=
n= mt =
2. How much is the cash equivalent of an electronic product
which can be purchased by paying a down payment of ₱5,000
and ₱2,500 payable at the end of each quarter for 2 years and
9 months. The money is worth 4.5% compounded quarterly.
Given:
Down payment = P5,000
R = P2,500
j =4.5% = .045
m =4
t= 4 years and 9 months
i=
n= mt =
Find: Aₒ and cash equivalent
+ 𝐷
[ 1− ( 1+ ⅈ )
] A
−𝑛
=𝑅 Cash equivalent = CEₒ=
ⅈ
[ ]
−11 CE = 25,730.80 + P5,000
1 − ( 1 +.01125 )
A ₒ =2,500
.01125 CE = P30, 730. 80
ₒ =2,500 (10.29231832)
ₒ = 𝑃 25,730.80
Mr. Erwinzkie Dumplingss deposit ₱4,500 every end of the month at
Malungon Ordinary Bank (MOB) that credits 3% monthly for 8
months. How much money does he have at the end of 8 months?
Find : S o
Solution:
Given: S
¿ 𝑅
( 1 + ⅈ )𝑛 − 1
o ⅈ [ ]
R= ₱4,500
= 4,500
m= 12
j= 3%
t= 8 months = 4,500
i= j/m = 0.0025
n=mt = 8 S o=𝑃 36,316.57993 𝑜𝑟 𝑃 36,316.58
FINDING THE REGULAR PAYMENT OR
PERIODIC PAYMENT
Formulas:
𝑆o ( ⅈ)
𝑅= periodic payment if the givenis ∑ of an ordinary annuity .
( 1+ ⅈ ) 𝑛
−1
Given:
Ao= ₱150,000
r= 10% or 0.10
m= 1
t= 3 years and 6 months or 3.5
0.10
i=
1
n= mt = 3.5(1) = 3.5
Find: R
A ₒ ( ⅈ)
=
[ 1− ( 1+ ⅈ ) −𝑛
]
P 150,00 ( .1 )
=
[ 1 − ( 1 + .1 ) − 3.5
]
P 15,0 00
=
0.2836494446
R= ₱52,882.17652 or ₱52,882.18
2. Mrs. Dolly Bugtong plant to travel abroad with her family. What
amount should she save at the end of each month in a bank that
credits 1.44% compounded monthly for 3 years in order to accumulate
P250,000 that she needs for her plan?
m=12
t=3 years
i==.0012
R=
R =
[ ( 1 +.0012 ) 36
−1 ]
R=
R = P6,799.69
Example:
To accumulate P85,250, Maria Jackson needs to place equal deposits at the end of 3
months of fund which earns 18% compounded quarterly. If he will deposit the same
amount in 6.25 years, How large should each deposit be?
Find: R
Given: 𝑆o ( ⅈ)
𝑅=
( 1 + ⅈ )𝑛 − 1
Sₒ= P85,250
𝑃 85 , 250 (0.045 )
m= 4 t= 6.25 𝑅= 25
n= 6.25(4)= 25 ( 1 + 0.045 ) − 1
j= 18% or 0.18 𝑃 3,836.25
𝑅=
i= j/m= 0.18/4= 0.045 2.00543445654
𝑅 = 𝑃 1,912.93
PRESENT VALUE OF
DEFERRED ANNUITY
Solution:
Given:
R = P 3,000 w = 2.75% = 0.275 m = 1
i=
(Note: The given formula below ang use with -1 for the deferment period if the first payment is
mentioned in the problem and n + 1 for total number of conversion period if the last payment
is stipulated.)
d = t m -1
d = 3(1) -1
d=2
p = ( term of the last payment – term of the first payment) x ( conversion period) + 1
p = (8-3) + 1 = 6
n=p+d=6+2=8
= 3,000
= 3,000
𝐴 𝑑 =20 , 158.95547∨20,158.96
2. What is the cash value of an IPOD that can be bought for P2,000 down
payment, and an 8 monthly payments of P850 (inclusive the rate of interest)
through credit card. The first payment is due after 3 months from today.
Money is worth 2.4% compounded monthly.
Solution:
Given:
R = 850 DP = P2,000
r = 2.4%=.024 m = 12
i=
p= 8 n = p + d = 8 + 11 = 19
Find: Ad
8
=850[29.08951704)-850(10.86973604)
=P24,726.08948 - P9,238.765634
Ad=15,487.32385 or 15,487.32
FORMULA:
Examples:
• 1. Mr. Sebastian avails the loan offered by his company with a minimal interest of 1,5% every 6 months. He borrows
P150,000 and agrees to discharge his loan by paying a series of 10 equal semi-annual payments. The first payment is
due at the end of 2 years. What amount should he pay every 6 months?
• Solution:
• Given:
R =
R =
R =
P12,428.79
R =