Test 18-A Solution

1. F=P(1+in)
1500 = 1000 [1 + (i(3)]
I = 0.1667
I = 16.67%
2. Interest = 0.20(100,000)
Interest = 20,000

Amount received = 100,000-20,000

Amount Received = 80,000

I = Pin
20,000 = 80,000(i)(1)
I = 0.025
I = 2.5%
3. F = P (1+in)
F = 10,000(1 + 0.18)
F = 11,800
4. Discount = 0.03(1,200)
Discount = 36
Amount Payable in 30 days = 1,200 – 36
Amount payable in 30 days = 1,164

I = Pin
30
36 = 1,164(i) ( )
360
I = 0.3711
I = 37.11%
5. Solving for rate of discount, d
80
d=
2,000
d = 0.04
d = 4%

Solving for the rate of Interest, i

0.04
I=
1−0.04
I = 0.0417
I = 4.17%
6. I = Pin
11,200 = 68,800(r)(1)
I = 0.1628
I = 16.28%
profit
7. Rate of return =
invested capital
 P
Rate of return = 𝐶

P−0.42P
0.07 =
C
P
= 12.07%
C

Rate of return = 12.07% (Before payment of taxes)

8. Net interest = I – 0.20i

Net interest = 0.80i
890.36 = 0.8i
I = 1112.95
I = Pin

31
1112.95 = 110,000(i)( )
360
I = 0.1175
I = 11.75%

9. F = P(1 + in)
F = 5,000[ 1 + (0.16)(75/360)]
F = 5,166.67

10. I = 0.16(20,000)
I = 3,200

3,200 = (20,000 – 3,200)(i)(1)

I = 0.1905
I = 19.05%

11. Interest = 0.06(20,000) = 1,200

Proceeds on the note = 20,000 – 1,200
Proceeds on the note = 18,800

12. Solving for the simple interest rate, i

F = P (1 + in)
1,500 = 1,340[ 1 + i(270/360)]
0.1194 = (270/360)(i)

I = 0.1592
I = 15.92%

Solving for Discount, d

 d = 1 – (1/1+i)
d = 1 – (1/1 + 0.1592)
d = 0.1373
d = 13.73%

13. F = P(1 + in)

1,250 = P [ 1 + 0.08(60/360)]
P = 1,233.55

14. I = Pin

Solving for the total number of days money was invested, d

January 15-31 = 16
February = 29 ( since 1996 is a leap year )
March = 31
April = 30
May = 31
June = 30
July = 31
August = 31
September = 30
October 1 -12 = 12

271 days

I = 5,000(0.18)(271/360)
I = 666.39

15. I = Pin
June 21 – 30 = 9
July = 31
August = 31
September = 30
October = 31
November = 30
December 1 -25 = 25

187 days

100 = 5,000(i)(187/360)
I = 0.0390
I = 3.90%

16. F= Pin
April 22 – 30 =8
May = 31
June = 30
 July = 31
August = 31
September = 30
October = 31
November = 30
December 1 – 25 = 25

247 days

10,000 = P [ 1 + (0.20)(247/365) ]
P = 8,807.92

17. F = P(1 + 𝑖)𝑛

F = 20,000(1 + 0.065)7
F = 31,079.73

18. F = P(1 + 𝑖)𝑛

65,000 = 50,000(1 + 𝑖)3
1.0914 = 1 + i
I = 0,914

19. ER = (1 + 𝑖)𝑛 - 1
0.18
ER = (1 + 360 )360 - 1
ER = 19.72%

20. ER 1 = ER 1
2 4

NR 2 NR 4
(1 + 2
) – 1 = (1 + 2
) –1

𝑁𝑅
2
= 0.0816

NR = 16.32%

21. A. ER = 12.35 % ( if compounded annually, NR = ER)

B. ER = ( 1 + 𝑖)𝑛 – 1

0.119
ER = (1 + 2 )2 -1
ER = 12.25%

0.122 4
C. ER = (1 + 4
) -1

ER = 12.77%

0.116 12
D. ER = (1 + 12
) -1
 ER = 12.24%

22. F = P( 1 + i)n
0.06 5.5(4)
F = 2,500(1 + 4
)
F = 3,864.95

23. F = ( 1 + i)n
1
1.6084424 = 1,000(1 + i)4(5)
1.02 = 1 + i
I = 0.02

NR
0.02 =
6
NR = 12%

24. F = P( 1 + i)2n
0.12 2n
2000 + 3000 = 2000 ( 1 + )
2
2.5 = (1.06)2n
N = 7.86 years

25. F = P( 1 + i)n
To Double the money, F = 2P
2P = P((1 + i)n
2 = (1 + 0.05)n

N = 14.2 years

26. ER quarterly = ER semi−annually

i 0.06 2
(1 + 4)4 - 1 = (1 + 2
) -1
I = 0.0596

27. F = P( 1 + i)n
0.09
100,000 + 50,000 = 100,000(1 + 4 )4N

N = 4.56 years

28. F = P( 1 + i)n
0.08
F = 5,000( 1 + 4 )4(10)
F = 11,040.20
Interest = F – P
Interest = 11,040.20 – 5,000
Interest = 6,040.20

29. F1 = P( 1 + i)n
F1 = 1,000(1 + 0.05)8
F1 = 1,477.46
 F2 = P( 1 + i)n
F2 = 477.46(1 + 0.05)8
F2 = 705.42

30. ER = ( 1 + i)m - 1
0.095 m
0.0984 = ( 1 + ) –1
m
By trial and error:
M=4

31. F = P( 1 + i)n
3P = P(1 + 0.1156)n
N = 10.04 years

32. F = P( 1 + i)n
F1 = 1,500( 1 + 0.10)6
F1 = 2,657.34

F2 = 3000( 1 + 0.10)4
F2 = 4,392.30

F3 = 5000( 1 + 0.10)1
F3 = 5,500.00

P + 5,500 = 2657.34 + 4392.30

P = 1,549.64

33. F = P( 1 + i)n
0.1125 93
F = 500,000(1 + 12
)
F = 1,190,848.73

Interest = F – P
Interest = 1,190,848.73 – 500,000
Interest = 690,848.73

F
34. P1 = (1+i)n
100
P1 = (1+0.08)3
P1 = 79.38

100
P2 = (1+0.08)4
P2 = 73.50

Present Worth = P1 + P2
Present worth = 79.36 + 73.50
Present worth = 152.88
35. F = P( 1 + i)n
F1 = 2,000 (1 + 0.08)8
F1 = 3,701.86
F2 = 2,000(1 + 0.08)2
F2 = 2,332.80

Total Future worth = F1 + F2

Total Future worth = 6,304.66

Solving for its present worth:

F
P = (1+i))n

6,034.66
P = (1+0.08)8

P = 3,260.34

F
P = (1+i))n

2,000
P = (1+0.08)6

P = 1,260.34

36. To replace the machine with an exact duplicate 5 years from now, The company will need the
same amount of P 18,000. Since there will be a scrap value of 2,000, the company will need the
amount of P 16,000 only.

Without inflation,
Capital to accumulate = 16, 000

With inflation,
Capital to accumulate = 16,000((1 + 0.15)5
Capital to accumulate = 18,548.38

37. F = P( 1 + i)n
F = 10,000(1 + 0.15)5
F = 20,113.57

Let P = present worth of the account due to inflation:

F
P = (1+i))n

20,113.57
P= 5

P = 15,030.03
38. F = P( 1 + i)n
F = 10,000(1 + 0.12)5
F = 17,623.03

39. 50,000 + P3 = P1 + P2 ( eq. 1 )

ER annually = ER semi−annually
0.05 2
(1 + i) – 1 = (1 − 2
) -1

I = 0.0506

F
P = (1+i))n

25,000
P1 = (1+0.0506)
P1 = 23,795.93

75,000
P2 = (1+0.0506)4
P2 = 61,561.85

P
P3 = (1+0.0506)2
P3 = 0.906P

50,000 + 0.906P = 23,795.93 + 61.561.85

P = 39,026.25

40. Solving simple interest:

I = Pin
I = 50000(0.10)(3)
I = 15,000

Solving for compounded interest.

F = P( 1 + i)n
F = 50,000(1 + 0.10)3
F = 66,550

Interest = F – P
Interest = 66,550 – 50,000
Interest = 16,550

Difference = 16,550 – 15,000

Difference = 1,550

41. P1 + P2 = P3

F
P = (1+i))n
 150,000
P1 = 0.05 4(1)
(1+ )
4
P1 = 142,728.64

280,000
P2 = 0.05 4(2)
(1+ )
4
P2 = 253,511.56

150,000+ 280,000
P3 = 0.05 4(n)
(1+ )
4
430,000
P3 = 1.01254n

430,000
142,728.64 + 253,511.56 = 1.01254n
430,000
396,240.2 =
1.01254n

1.01254n = 1.10852

N = 1.64 years

F
42. P =
(1+i)n

10,000
P=
(1+0.04)15
P = 5,552.64

43. Proposal A has a present worth of P 400,000

For Proposal B,
Present worth = 300,000 + P

F
P = (1+i)n

200,000
P = (1+0.20)5

P = 80,375.51

Present worth = 300,000 + 80,375.51

Present worth = 380,375.51

Therefore, proposal B is more economical than proposal A by P 19,624.49

44. ER = ( 1 + i)m -1
0.36
ER = ( 1 + 12 )12 – 1
ER = 0.4257%
 ER = 42.57%

45. F = P(1 + i)n

0.12 15
F1 = 1,000,000(1 + 12
)
F1 = 1,160,968.95

0.12 1
F2 = 1,000,000(1 + 12
)
F2 = 1,010,000.00

Total amount = F1 + F2
Total amount = 1,160,968.95 + 1,010,000
Total amount = 2,170,968.95

46. Present value of investment = 1,000 + P1 + P2 + P3 + P4

F1 F2 F3 F3 F4
P = 1000 + + + + +
(1+i) (1+i)2 (1+i)3 (1+i)3 (1+i)4

2000 3000 4000 5000

P = 1000 + + 2
+ 3
+
(1.1) (1.1) (1.1) (1.1)4

P = 11,717.85

47. P + F1 + F2 + F3 + 30,000 = 400,000

Note that SV = 30,000

F = P(1 + i)n

0.05 4(3)
F1 = 60,000((1 + 4
)
F1 = 69,645.27

0.05 4(2)
F2 = 60,000((1 + 4
)
F2 = 66,269.17

0.05 4(1)
F3 = 80,000((1 + 4
)
F3 = 81,000.00

P + 69,645.27 + 66,269.17 + 81,000 + 30,000 = 400,000

P = 153,085.56

48. F4 = 4,000 + 152,000 + F1 + F2 + F3

F = P( 1 + i)n

F1 = 4,400(1 + i)1
F2 = 4,400(1 + i)2
F3 = 4,400(1 + i)3
 F4 = 4,400(1 + i)4

144,000(1 + i)4 = 4,000 + 152,000 + 4,000(1 + i) + 4,400(1 + i)2 + 4,200(1 + i)3

By trial and error:

I = 0.0426%
I = 4.26% (semi annual)

NR = 4.26(2)
NR = 8.53%

Interest is 4.26% per semiannual period or 8.52% compounded semiannually

49. 13, 760 = P1 + P2 + P3 + P4

F
P=
(1+i)n

4,000
P1 =
(1+i)4

5,000
P2 =
(1+i)5

6,000
P3 = (1+i)6

9,000
P4 = (1+i)7

13,760 = P1 + P2 + P3 + P4

4,000 5,000 6,000 9,000

13,760 = + + +
(1+i)4 (1+i)5 (1+i)6 (1+i)7

By trial and error:

I = 0.1011
I = 10.11%

50. F = Pe(NR)N
F = 10,000e(0.03)10
F = 13,498.59