1. What is the annual rate of interest if P265 is earned in four months on an investment of P15, 000?

Solution:

n=number of interest periods

n=4/12=1/3
i=I/Pn
i=265/(15,000)(1/3)=0.053x100=5.3% the annual rate of interest

P265

____________________________
1 2 3 4

2. A loan of P2, 000 is made for a period of 13 months, from January 1 to January 31 the following year,
at a simple interest rate of 20%. What future amount is due at the end of the loan period?

F=P(1+ni)
F=2,000[1+(13/12)(0.02)]
F=P2,433.33 the amount due at the end of the loan period.

F=?
____________________________
1 2 3 4 5 6 7 8 9 10 11 12 13

P2000
3. If you borrow money from your friend with simple interest of 12%, find the present worth of P20,
000, which is due at the end of nine months.

Solution:

F=P(1+ni)
20,000=P[1+(9/12)(0.12)]
20,000/(109/100)=(109/100)P/(109/100)
18,348.62385=P
The present worth of 20,000 is 18,348.62385

F=20,000
________________
1 2 3 4 5 6 7 8 9
P=?

4. Determine the exact simple interest on P5, 000 for the period from Jan. 15 to Nov. 28, 1992, if the
rate of interest is 22%.
Solution:

From January 15 to November 28, 1992

Total days=318 days

Exact simple interest= Pin

=5000*(318/366)*0.22
=P955.74
5. A man wishes his son to receive P200, 000 ten years from now. What amount should he invest if it will
earn interest of 10% compounded annually during the first 5 years and 12% compounded quarterly during
the next 5 years?

Solution:
Compounded annually during the first 5 years
i=10% n=5
12% Compounded quarterly during the next 5 years
i=(12%/4)=3% n=5*4=20
P1=F(1+i)-n
=200000(1+0.03)-20
P1=P110,735.1508

P2=P1(1+i)-n
=110, 735.1508(1+0.10)-5
P2=P68,757.81637
i=12% F=200,000
_________ _________
1 2 3 4 5 i=10% 1 2 3 4 5
P=?
P2=?
5. By the conditions of a will, the sum of P25, 000 is left to a girl to be held in trust by her guardian
until it amounts to P45,000. When will the girl receive the money if the fund is invested at 8%
compounded quarterly?

Given:

P = P25, 000 i = 8% ∕ 4= 2%

F = P45, 000

Solution:

F = P (1+i) n

45000= 25000 (1+0.02)4n

45000∕25000= (1.02)4n

1.8= (1.02)4n

In (1.8) = 4nln (1.02)

29.682 = 4n

n = 7.42 years
7. At a certain interest rate compounded semiannually, P5, 000 will amount to P20,000 after 10 years.
What is the amount at the end of 15 years?

Given: Solution:
P = P5, 000 At n1 = 10, F1= P20, 000
n1 = 10 𝑖
F1 = P(1+2 )2(n )
1

F1 = P20, 000 𝑖
P20, 000 = P5, 000(1+ )2(10)
2
n2 = 15
i = 14.35%
F2=?
At n2 = 15
𝑖
F2 = P(1+ ) 2(n2)
2

.1435 2(15)
F2= P5, 000(1+ 2
)

F2= P39, 973.74

8. Jones Corporation borrowed P9, 000 from Brown Corporation on Jan. 1, 1978 and P12, 000 on Jan. 1,
1980. Jones Corporation made a partial payment of P7, 000 on Jan. 1, 1981. It was agreed that the balance
of the loan would be amortized by two payments, one of Jan. 1, 1982 and the other on Jan. 1, 1983, the
second being 50% larger than the first. If the interest rate is 12%, what is the amount of each payment?

Given: i = 12%

Solution:
3
P9, 000(1+i)5 + P12,000 (1+i)3 = P7,000(1+i)2 + X(1+i) 2 + 2X

3
P9, 000(1+ 0.12)5 + P12,000 (1+0.12)3 = P7,000(1+0.12)2 + X(1+0.12) 2 + 2X

3
X=P9, 137.18 2
X= P13, 705.77
9. A woman borrowed P3, 000 to be paid after 1 ¹/2 years with interest at 12% compounded semiannually
and P5,000 to be paid after 3 years at 12% compounded monthly. What single payment must she pay after
3¹/2 years at an interest rate of 16% compounded quarterly to settle the two obligations?

Given: 𝑖2 2(𝑛 )
F2 = P(1+ ) 2
2
P1 = P3, 000 P2 = P5, 000
0.12 12(3)
n1 =1 n2 =3 n3 = 3 F2 = P5, 000 (1+ )
2

i1 = 12% i2 = 12% i3 = 16% F2 = P7, 153.84

Solution: 𝑖3 4(𝑛 −𝑛 ) 𝑖3
F3 = F1(1+ ) 3 1 + F2(1+ ) 4(𝑛3 −𝑛2 )
4 4
𝑖1 2(𝑛 )
F1 = P(1+ ) 1
2 0.16 4(31−11) 0.16 4(31−3)
F3 = P3, 573.05(1 + ) 2 2 + P7, 153.84(1 + ) 2
4 4
0.12 2(11)
F1 = P3, 000 (1+ ) 2
2 F3 = P4, 889.96 + P7, 737.59

F1 = P3, 573.05 F3 = P12, 627.55

10. Mr. J. de la Cruz borrowed money from a bank. He received from the bank P1, 342 and promise to
repay P1, 500 at the end of 9 months. Determine the simple interest rate and the corresponding discount
rate or often referred to as the “Banker’s discount”.

Given:

Discount = P158

Principal = P1, 500

d = rate of discount

i = rate of interest

Solution:
𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 158
𝑑= 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙
= 1500
= 0.1053 𝑜𝑟 10.53%

𝑑 0.1053
i = 1−𝑑 = 1−0.1053
= 0.1177 𝑜𝑟 11.77%

The rate of discount is equal to 10.53% and the simple interest rate is equal to 11.77%.