ALCORCON ENGINEERING REVIEW CENTER
Cebu Main: 4" floor Coast Pacific Downtown Center, Sanciangko St, Cebu City Tol #(032) 254.33-84
Manila: 3° floor JPD Bldg. 1955, C M Recto Comer N. Reyes St, Sampaloc, Manila Tel # (02) 736-4498
DAY 13 - MATHEMATICS SAMPLE PROBLEMS
ORDINARY ANNUITY
PROBLEM 1
‘piece of machinery can be bought for P10,000 cash, of for P2000 down and payments of P750 per year for 15 years.
What is the annual interest rate forthe time payments?
A 461% B. 3.81% ©. 5.71% D. 11.00%
SOLUTION: 750 750 750 780 750
aaa eee ears)
TT
rg
= 10,000 - 2,000
P=P8,000
pe Rei 9
(tei
7501 + iy
(1)
8,000 =
Ty: 4.81%
750{(1 + 0.0464)" ~ 4]
(1 + 0.0461)'°(0.0461)
8,000 = 6,000
8,00
Therefore: i= 4.61%
PROBLEM 2
‘An instructor plans to retire in exacly one year and want an account that will pay him P25,000 a year for the next 15
years. Assuming a 6% annual effective interest rate, what is the amount he would need to deposit naw? (The fund
will be deposited after 15 years)
‘A. P249,000.00 B. P242,806.00 C. 258,500.00 D. P250,400.00
SOLUTION: sr 2st 2st ast 2s
yyy yy
---4
oT? 4 44s
stg
pe Rute
(tei 25000(1 + 0.06)"*
P
(1+ 0.06)"°(0.06)
PROBLEM 3
‘A manufacturing firm wishes to give each employee a holiday bonus. How much is needed to invest monthly fora year
at 12% nominal interest rate compounded
‘monthly, so that each employee will receive a P2,000 bonus?
‘A. P12,608.00 B. P12,610.00 C. P12,600.00 D. P12,300.00
SOLUTION:
o.12112= 0.01
p= R41
F = 6042000) = 160,000
160,000 = Rid 0.00) — 9
O01
R=P 1261560
PROBLEM 4
What isthe size of 10 equal annual payments to repay a loan of P100,000 if money earns 10%4? First payment is one
year after receiving the loan
‘A P18,034.45 B. P16,274.54 C. P17,946.35 D. P15,927.45
SOLUTION:
R RR
‘ cand
ane %
peRiitit-4
iri
100,000 = R {C.0 —1
(1.4)°(0.1)
R= PI6274.54
PROBLEM 5
A hand tool costs P200 and requires P1.21 labor cost per unit. A machine tool costs P3600 and reduces labor to PO.7S.
What isthe break-even point (in years) at 5% for an annual production of 4000 units?
A1ssy B.t76yr | C.234yr OD. 1.56yr
SOLUTION: e a
¥ ¥
oe
[roses .
P = present cost = 3600-200 = 3400.00
R= annual savings (1.21 -0.75)(4000) = P1840
p= pts
ii
3400 = 1aq0llt+ 005" — 1.
(1+ 0.05)"(0.05)
0.09239(7.05)' = (1.05y'- 4
o.90761(1.057 = 1
(105y' = 1.10179)
Int.10178
Tn.05
1.986 years,
PROBLEM 6
A sinking fund consists of 15 annual deposits of P1,000.00 each, with interest earned at the rate of 4% compounded
annually. What isthe principal in the fund at its terminal dato?
‘A P25,115.00 B. P29,546.37 C. P20,02359 D. P28,105.00
SOLUTION: tr
SS PEE SS
yyy ey Yy
OTT ttt as
;
‘A P10,000.00 loan isto be paid off in 10 equal annual payments. The annual interest rate is 15%. How much interest
will be paid inthe frst two (2) years?
‘A. P3,005.10B, P2,940.20 C. P2,970.20 D. P2,926.10
souumion: RRR RR BR
seeded dG
P= 12,000
10924 .
E
‘Solving forthe annual payment
R [* “ip ‘
(iyi
P
(140.15)
(1+ 0.15)(0.15),
1,992.52
10,000 = [
R 2,291.40
2,695.11
Ifno interest, R'= 10,000/10
Interest paid inthe first two years:
(2,291 40 + 2,635.11) - 21,000.00)
2,926.51
(000
PROBLEM 8
A steel mill estimates that one ofits furnaces will require maintenance of P20,000.00 at the end of 2 years, P40, 000.00
at the end of 4 years and P80,000.00 atthe end of 8 years. What uniform semi-annual amounts could it set aside over
the next eight years at the end of each period to meet these requirements of maintenance cost if ll the funds would
learn interest a the rate of 6% compounded semi-annually?
‘A P7,897.35 B. P6897.35 C. PI397.35 DO. P8,897.95
SOLUTION:
‘Solving for the
effective interest per year:
0.0612 = 0.03
(semi-annual)
20000
(1.03)?
40,000
80000 = p9a,199.46
P aoe
G03 * G03?
p= Rilsi=9
ai
n= 8(2)=16
99,199.46 = Rltt.03)"° — 4)
0.03(1.03)%
R= 7,897.35
PROBLEM 9
‘car was bought on installment of 10,000.00 for 60 months. If the interest is 12% compounded annually, calculate
the cash price ofthe car.
‘A. P456,538.75 B. P345,599.75 C. P5G7,539.75 D. PE78,539.75
SOLUTION:
Solving for equivalent monthly interest:
(tip
0.0084888 (monthly)
P = cash price of car
pe pitei-9
(i
10,000((1.0094888)” - 4]
P
0.0094888(1.0094888)"
P= P455,874.01 PROBLEM 10
‘A company puts P25,000.00 down and wil pay P5,000.00 every year forthe fe of a machine, 10 years. Ifthe salvage
value is zero and the interest rate is 10% compounded annually, what is the present valu of the machine?
‘A. P56,2000.00 B. PS5,100.00 C. P55,723.00 D. P55,300.00
SOLUTION:
ast
t ST ST ST ST ST
eevee
oma Sreaaae
P
perc+ alitit—t
(+ ifi
a
P= 25.00. spools 010)" =
(1 0.10)"(0.10)
P= P55,72283
PROBLEM 11
‘A motorcycle cost P50,000 and has an expected life of ten years. The salvage value is estimated to be P2,000 and
annual operation costs are estimated at P1,000. What isthe appropriate rate of return on the investment if the annual
revenue is P10,000.007
A 12% 8.11% ©. 13% D. 14%
SOLUTION: tsv-2000
TET TT
Se
oT? sas 3 i
}P= 20.000
pe gltei-9 sv
cain GeiP
= 10,000 1000 = P8000
0,000 = (goo0} {t+ =) _ _2000
ao | ay?
Ty i= 0.127
{50,000 ~ 50,032.43
‘Therefore choose i= 13%
PROBLEM 12
Mr. Robles plans a deposit P500.00 a the end of each month for 10 years at 12% annual interest, compounded monthly
‘The amount that will be available in two years is:
‘A P13,987.00 B. P13,678.00 C. P13.875.00 D. P13,487.00
SOLUTION:
te
s
'
3
2
—%
FF
4
23
—%
% F = soollt + 0.01 = 1 _ p13.487.00
0.01
PROBLEM 13
‘he president of a growing engineering firm wishes to give each of 50 employees a holiday bonus. How much is
needed to invest monthly for a year at 12% nominal interest rate, compounded monthly, so that each employee will
receive a P'1,000 bonus?
‘A P2,760.00 B. P3,940.00C. P4,311.00 _D. P3,890.00
SOLUTION:
fte=1,000
RRR RR R
Naoveay vn, ¥
et
att %
or212=001
(12)
Fe pli =4
1000 = pllt+ 0.010) - 4)
0.01
R= P78.648 per employee
For 50 employees:
R= 78.848(60) = P3,942.00
PROBLEM 14
Mr. Ramirez borrowed P'16,000 two years ago. The terms ofthe loan are 10% interest for 10 years with uniform
payments. He just made his second annual payment. How much principal does he still owe?
‘A P12,000.00 8. P13,024.00 C. P10,117.00 D. P11,700.00
SOLUTION: vey
ae
(+ iP = 4) 0 23 4 8
ipl P= 15,000
0
15,000 = pit 0:10)" = we
(1 0.10)%(0.10) aah
R=P2,441.18 vv
yyy
a
mTTttTt 7%
Pp
Principal he sti ove
e
Pea REDD a gay gal L's 0.109" — 9
ei (1+ 0.10)°(0.10).
Pr=P 13,023.82 PROBLEM 15
‘An employee is about to receive the sum of P300,00 at the end of each year for 5 years. One year prior tothe receipt
ofthe first sum, he decides to discount all § sums. Ifthe interest rate is 6%, what proceeds will he obtain?
‘A P1875.35 B. P2,287.03 C. P1,263.71 D. P1,450.72
SOLUTION: f SPSS
Pp
wi cst
pe ool 000) 1 yaar YP
(1+ 0.06)° (0.06)
PROBLEM 16
‘Company purchases 200,000 of equipment in year zero. It decides to use straight line depreciation over the expected
20 years life of the equipment. The interest rate is 14%. Ifits average tax rate Is 40%, what isthe present worth ofthe
‘depreciation tax held?
‘A P3,500.00 B. P26,500.00 C. 39,700.00 D. 4,000.00
souumoN: SPPPS
pitti
oTr2s 4s
yr
Using straight line depreciation method:
= 200,000-0
20
Depreciation Tax = 10,000 x 0.40 = P4,000.00
I
lee
10,000.00
Solving fr the present worth of tax
ats -4
oir
p= apooit+0.14)" = 1)
oP 0.14)7(0.44)
PROBLEM 17
IT P50 was invested at 6% on January 1, year 1, what equal year-end withdrawals could be made each year for ten
years, leaving nothing in the fund after the tenth withdrawal?
‘A P2.34 B. P9223 ©. P5.34 D. P6.80
SOLUTION:
ard
| Fie
SOLUTION:
‘Amount at the end of 16th year: S = P(1 +i) = 5000(1 + 0.07)" = P14,760.62
P ase |
oo
14,760.82 = 4000 orf -4 ous
aontory | * (ore
A= P1699.86
PROBLEM 6
‘A mother borrowed P100,000 with 2% interest monthly and promised to pay the amount by 30 equal monthly
instalments starting 1 year from naw. Determine the monthly payment.
‘A.P5,551.68 B.P8551.66 C. P7.551.66 0. P8.551.66
SOLUTION: RR RR
n= 30
$e _
oTr?;s v2 43 ah
a
P = 100,000
Solving for P
Pry = P( 141)" = 100000 ( 1.02)"
Pix = 124,397.43
For the monthly payment:
ait
ro ape
124,997.43 = | (1-02) 1
(1.02}(0.02)
R = P5.551.68
PROBLEM 7
Mr. Rankine bought a piace of property or P100,000 down payment and 10 deferred semiannual payments of P8,000
slarting 3 years from now. Ifthe interest rate is 12% compounded semiannwally, what is the present worth of the
property?
‘A P143,999.08 B. P148,555.02 C. P152,444.05 D. P166,888.01
mn tte
io JB Rec,
fr
i= 0.122 = 0.06,
For the deferred semi-annual payments:
n= 10
pe pp@it-t
ci
Ps won| 08°)
[s05)" 606)
583860.69
(1.06)°
;
58,880.69
Pre 43999,08 P; + down payment = 43999.08 + 100,000
143,999.08,
ANNUITY DUE
PROBLEM 1
‘Mr. Ayala borrows P100,000.00 at 10% effective annual interest. He must pay back the loan over 30 years with uniform
‘monthly payments due on the first day of each month. What does Mr. Ayala pay each month?
‘A P870.00 —B. P846.00C. PB7B,00 —_—D. 839,00
SOLUTION: RR RERRRE ® I
teeedy 4
P= 100,000
‘Solving forthe equivalent monthiy interest
= (HIP = 4
0.410 = (1 +iy~1
1-= 0.007974 (per month)
For annuity due!
p= nenitel 1
R al ie
100.000 = r+ r| (0079748 = 1
0.007974(1.007974)"9
R = Pe30.19
PROBLEM 2
‘An employee borrowed P200,000 with 16% interest compounded semi-annually promised to pay every 6 months for
410 years starting today. What amount should. he pay every 6 months?
AP18861.52 B.P1686152 C.P24.861.52 D.P26,861.52
SOLUTION: eoecee te
ee
a tot
i = 0.16/2 = 0.08 {P= 200,000
a (10) = 20
po a[teit—t.8
aii
200,000 = p| 1987 -1 | 9
(1.08) (0.08)
R = preg61.52
PROBLEM 3
A contractor bought a concrete mixer at P120,000 if paid in cash. The mixer may also be purchased by installment to
be paid within 5 years. If money worth 8%, the amount of each annual payment, ill payments made at the beginning
of each year, is:
‘A P27828 © B.PB97TB CC. P3105. P3,555 SOLUTION:
(ip 4 TTT
7 non ae | [Po sno
n= (12)-1 = 59
120,000 = p+ p|—108) =!
(.08)(0.08)
13.37 = 120000
R= P8975
UNIFORM GRADIENT
PROBLEM 1
‘The maintenance cost of a machine this year is expected to be P1,000, The cost will increase P200 each year forthe
subsequent 9 years. The interest is 15% compounded annually. What is the approximate worth of maintenance for
‘the machine over the full 10 years?
APA81467 —B. P4,481.76 ©. PBA14.67 —_D. 4,418.67
sous: 4
Sree eeteers + Tl T
| Sea se es |
pe (ait), foem-1 on]
(sift (ie aii
n=10
15%
=P20000
R= Pi000.00
P= 1004. 2048)" 1), oy] 0.18) 1 10
(1+ 0.15)0.15 (1+ 0.15) (0.157 + 0.15)%(0.1!
P = poatsas
PROBLEM 2
‘The maintenance of a car is said to be P500.00. The maintenance is said to increase of P50.00 each year and
subsequent for 9 years. The money is estimated to 8% compounded annually. What is the present worth of
‘maintenance forthe full of 10 years?
‘A P4,378.00 B. P4,064.00 C. P4,658.00 D. 4,454.00
SOLUTION: 980
iP if so 7 |
a+iP=41) fa+it-1__ on |
P= + -
Coat) Tt
n= 10 — Tt
8% fr
R= P500
G=Ps50
P= go 140.08) -1), gf _(1+0.08)—1 ___ 10
(1 0.08)"0.08 (1+ 0.08)"9(0.08)? (1 + 0.08)'°(0.08),
P = P4653.89 PROBLEM 3
‘An car costs P6000. Annual costs are P400 the first year, P500 the second year, P00 the third year, and so on,
increasing P100 each year. Use 10% to find the year in which the car should be replaced.
A14 36 ©. 10 D. 19
SOLUTION: 400+(9-1)100
600
eo oor). (oot 8 ]
a Sloane Guih
6,000 = «00 Ft) eo tes 8 |
L101) 0.4 (1.10.1),
Tyin=13
6,000 = ao a=) +100 [foes atl
(1.00.1) ay o4? (1950.1),
6.000~6179.04
‘Therefore the car should be replaced in year 14 since it started at year 1