Scribd Logo
Upload

Welcome to Scribd!

  • Lesson-3 Ee

    Uploaded by

    Christian Magdangal
    41 views15 pages
    This document discusses discount, inflation, and example problems related to each topic. It defines discount as the difference between present worth (cash received) and future worth (face value) of a negotiable paper, with the discount representing interest paid in advance. The rate of discount is calculated as the discount on one unit of principal for one unit of time. Inflation is defined as the increase in prices for goods and services over time, decreasing the purchasing power of money. The rate of inflation and effects of inflation over multiple years are explained through formulas. Several example problems demonstrate calculating discount rates, effects of inflation on future costs, and accounting for inflation in investments.

    Original Description:

    asdas

    Original Title

    LESSON-3 EE

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document discusses discount, inflation, and example problems related to each topic. It defines discount as the difference between present worth (cash received) and future worth (face value) of a negotiable paper, with the discount representing interest paid in advance. The rate of discount is calculated as the discount on one unit of principal for one unit of time. Inflation is defined as the increase in prices for goods and services over time, decreasing the purchasing power of money. The rate of inflation and effects of inflation over multiple years are explained through formulas. Several example problems demonstrate calculating discount rates, effects of inflation on future costs, and accounting for inflation in investments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    41 views15 pages

    Lesson-3 Ee

    Uploaded by

    Christian Magdangal
    This document discusses discount, inflation, and example problems related to each topic. It defines discount as the difference between present worth (cash received) and future worth (face value) of a negotiable paper, with the discount representing interest paid in advance. The rate of discount is calculated as the discount on one unit of principal for one unit of time. Inflation is defined as the increase in prices for goods and services over time, decreasing the purchasing power of money. The rate of inflation and effects of inflation over multiple years are explained through formulas. Several example problems demonstrate calculating discount rates, effects of inflation on future costs, and accounting for inflation in investments.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 15

    ENGINEERING

    ECONOMICS
    E N G R . J AY V E E L . D E R O B L E S
    DISCOUNT AND INFLATION
    LESSON 3
    FR
    DISCOUNT
    Discount(D) on negotiable paper is the difference
    between the present worth (the amount received
    for the paper in cash) and the worth of the paper
    in the future (the face value of the paper or
    principal). Discount is interest paid in advance.

    Rate of discount(d) is the discount on one unit of


    principal for one unit of time.
    FR
    DISCOUNT
    D=F–P
    d = D/F

    Where: d = rate of discount for the period involved


    i = rate of interest for the same period
    n = number of years
    D= Discount
    F= Future Worth
    P= Present Worth
    FR
    PROBLEM NO. 1
    Engr. Lomotan borrowed Php 10,000 from
    a bank and promised to pay the amount for
    1 year. But he received Php 9,600 only
    after the bank deducted an advance
    interest.
    a. Find the discount and rate of discount.
    b. Find the rate of interest that the bank
    charged him.
    FR
    PROBLEM NO. 2

    A man borrowed Php5,000 from a bank and


    agreed to pay the loan at the end of 9
    months. The bank discounted the loan and
    gave him Php 4,000 in cash. (a) What was
    the rate of discount? (b) What was the rate
    of interest? (c) What was the rate of interest
    for one year?
    FR
    INFLATION
    Inflation is the increase in the prices for goods and
    services from one year to another, thus
    decreasing the purchasing power of money.
    FR
    INFLATION
    The rate at which price of goods and services increases
    with time.

    Where: PC = present cost of a commodity


    FC = future cost of the same commodity
    f = annual inflation rate
    n = number of years
    FR
    INFLATION
    In an inflationary economy, the If interest is being compounded
    buying power of money at the same time that inflation is
    decreases as cost increase: occurring:

    Where: F = Future worth of money


    P = Present worth of money
    f = annual inflation rate
    n = number of years
    i = interest rate
    FR
    PROBLEM NO. 1
    An item presently costs Php 1,000. If inflation is at
    the rate of 8% per year, what will be the cost of the
    item in two years?
    PROBLEM NO. 2
    An economy is experiencing inflation at an annual
    rate of 8%. If this continues, what will Php 1,000 be
    worth two years from now, in terms of today’s pesos?
    FR
    PROBLEM NO. 3

    A real estate broker stated that a house


    be sold in 1980 for Php 37,000 and
    was sold by the buyer for Php 90,000
    in 1990. If the increase in price is due
    solely to inflation, determine the
    average rate of inflation between 1980
    and 1990.
    FR
    PROBLEM NO. 4

    A man invested Php 10,000 at an


    interest rate of 10% compounded
    annually. What will be the final amount
    of his investment, in terms of today’s
    pesos, after five years, if inflation
    remains the same at the rate of 8% per
    year?
    FR
    FR
    ACTIVITY NO. 4
    1. On the occasion of the Christmas, a sweet shop
    offered 10% discount on the price of a pound of
    sweets. The normal selling price of one pound of
    sweets is $50. Find the selling price of one pound
    of sweets, after discount.

    2. If an item costs $100.00 today and the inflation


    rate is 2%, what will be the cost of the item in 10
    years?
    Thank You 

    You might also like