ACTIVITY 1

1) Goal: ₱300,000 in 3 years with monthly deposits; bank interest =

1.5% per month

(assumption)

Formula (ordinary annuity — deposits at end of each month):

FV = PMT\cdot\frac{(1+i)^n-1}{i}\quad\Rightarrow\quad PMT=\frac{FV\cdot i}{(1+i)^n-1}

Data: FV=300{,}000,\ i=0.015,\ n=36.

Compute:

PMT=\frac{300{,}000\times0.015}{(1.015)^{36}-1}= \mathbf{₱6{,}345.72}

Answer (write on paper): Deposit ₱6,345.72 at the end of each month for 36 months.

2) Aircon — choose best option (given info)

Given:

●​ Option A: Down ₱2,000 + ₱850 per month for 12 months; rate 1.2% (assumed monthly).​

●​ Option B: Down ₱2,000 + pay four times at 1% rate (unclear: amount of each of the 4
payments not given).​

What to write on paper (method & Option A numeric result):

a) Total nominal paid (Option A):

\text{Total}_A = 2{,}000 + 850\times12 = \mathbf{₱12{,}200.00}

b) Present value of Option A (discount monthly at i=0.012):

PV_A = 2000 + 850\cdot\frac{1-(1+i)^{-n}}{i},\quad i=0.012,\ n=12

PV_A = 2000 + 850\cdot\frac{1-(1.012)^{-12}}{0.012} = \mathbf{₱11{,}447.02}

c) Option B cannot be fully compared numerically because the amount of each of the 4
payments is not provided.

How to compare (write this): Compute PV_B = 2000 + P\cdot\frac{1-(1+0.01)^{-4}}{0.01} where

P is each of the 4 payments. The option with the lower PV is the cheaper option.

Answer (paper): Option A: Total paid ₱12,200; PV ≈ ₱11,447.02. Option B: need the 4-payment
amount to compare — compute PV_B as shown and choose the lower PV.

3) Loan ₱30,000 amortized with

equal semi-annual payments

for 3 years. Annual interest = 6% (semiannual rate = 3%).

Data: Loan=30{,}000,\ i=\tfrac{0.06}{2}=0.03,\ n=3\times2=6.

Formula (level payment):

PMT = Loan\cdot\frac{i}{1-(1+i)^{-n}}

Compute:

PMT = 30{,}000\cdot\frac{0.03}{1-(1.03)^{-6}} = \mathbf{₱5{,}537.93}

Amortization schedule (semiannual) — copy table:

Period Payment (₱) Interest (₱) Principal (₱) Balance (₱)

1 5,537.93 900.00 4,637.93 25,362.07

2 5,537.93 760.86 4,777.06 20,585.01

3 5,537.93 617.55 4,920.37 15,664.64

4 5,537.93 469.94 5,067.99 10,596.65

 5 5,537.93 317.90 5,220.03 5,376.63

6 5,537.93 161.30 5,376.63 0.00

(Interest = previous balance × 0.03; Principal = Payment − Interest; Balance reduces

accordingly.)

4) Loan ₱30,000 amortized with

equal quarterly payments

for 3 years. Annual interest = 6% compounded quarterly.

Data: Loan=30{,}000,\ i=\tfrac{0.06}{4}=0.015,\ n=3\times4=12.

Formula (level payment):

PMT = Loan\cdot\frac{i}{1-(1+i)^{-n}}

Compute:

PMT = 30{,}000\cdot\frac{0.015}{1-(1.015)^{-12}} = \mathbf{₱2{,}750.40}

Amortization schedule (quarterly) — copy table:

Period Payment (₱) Interest (₱) Principal (₱) Balance (₱)

1 2,750.40 450.00 2,300.40 27,699.60

2 2,750.40 415.49 2,334.91 25,364.69

3 2,750.40 380.47 2,369.93 22,994.76

 4 2,750.40 344.92 2,405.48 20,589.28

5 2,750.40 308.84 2,441.56 18,147.72

6 2,750.40 272.22 2,478.18 15,669.54

7 2,750.40 235.04 2,515.36 13,154.19

8 2,750.40 197.31 2,553.09 10,601.10

9 2,750.40 159.02 2,591.38 8,009.72

10 2,750.40 120.15 2,630.25 5,379.47

11 2,750.40 80.69 2,669.71 2,709.76

12 2,750.40 40.65 2,709.75 0.00

(Interest = previous balance × 0.015; Principal = Payment − Interest.)

5) Comparison: schedules in #3 (semiannual) vs #4 (quarterly)

Write these points on paper:

●​ Number of payments: Semiannual = 6 payments; Quarterly = 12 payments.​

●​ Payment size: Semiannual = ₱5,537.93 (every 6 months). Quarterly = ₱2,750.40 (every

3 months).​
 ●​ Total paid:​

○​ Semiannual total = 5{,}537.93\times6=\mathbf{₱33{,}227.58}.​

○​ Quarterly total = 2{,}750.40\times12=\mathbf{₱33{,}004.80}.​

●​ Interest paid (total paid − principal 30,000):​

○​ Semiannual interest = ₱3,227.58.​

○​ Quarterly interest = ₱3,004.80.​

●​ Conclusion: Quarterly schedule (more frequent payments) yields a slightly lower total
interest (₱3,004.80 vs ₱3,227.58), so quarterly is marginally cheaper in total cost here.​

6) Mortgage (illustrative problem) — general steps + one numeric example

Write on paper (general method):

●​ For a loan with periodic payment PMT, periodic rate i, and n periods:​
​
PMT = Loan\cdot\frac{i}{1-(1+i)^{-n}}​

●​ Total paid = PMT\times n. Total interest = total paid − principal.​

●​ The future (accumulated) value of the payments at loan end:​

​
FV = PMT\cdot\frac{(1+i)^n-1}{i}​

Illustrative numeric example (copy this):

Loan = ₱500,000; annual nominal 6% compounded monthly; term 15 years.

●​ i=0.06/12=0.005,\ n=180.​

●​ PMT=500000\cdot\frac{0.005}{1-(1.005)^{-180}}=\mathbf{₱4{,}218.35}.​

●​ Total paid = 4{,}218.35\times180=\mathbf{₱759{,}303.00}.​

●​ Total interest = 759{,}303.00-500{,}000=\mathbf{₱259{,}303.00}.​

7) Discounted loan — find the rate

Problem: Company receives net ₱135,000; bank’s advance interest (discount) = ₱5,800.
(Assumption: discount is for 1 year and bank uses simple bank discount on face amount.)

Write on paper (steps):

●​ Face amount F = \text{net} + \text{discount} = 135{,}000 + 5{,}800 = 140{,}800.​

●​ Discount rate r = \dfrac{\text{discount}}{F}.​

Compute:

r = \frac{5{,}800}{140{,}800} = 0.041193\Rightarrow \mathbf{4.1193\% \text{ per year}}

Answer (paper): Rate = \mathbf{4.1193\%} (annual, under bank discount convention and 1-year
period).

8) ₱75,000 (discounted) loan; regular payments for 5 years at 10%

compounded semi-annually.

Interpretation used (write this): ₱75,000 is the future/face amount due at 5 years. Bank
discounts it to find the amount received (PV). Payments are semiannual (i.e., 10 semiannual
payments) at semiannual rate i=0.10/2=0.05.

(a) Amount received (present value):

PV=\frac{75{,}000}{(1+i)^n},\quad i=0.05,\ n=10

PV=\frac{75{,}000}{(1.05)^{10}}=\mathbf{₱46{,}043.49}

(b) Periodic semiannual payment to amortize PV over 10 periods:

PMT=PV\cdot\frac{i}{1-(1+i)^{-n}}

PMT=46{,}043.49\cdot\frac{0.05}{1-(1.05)^{-10}}=\mathbf{₱5{,}962.84}

Answer (paper): Amount received (net) = ₱46,043.49. Semiannual payment = ₱5,962.84 (10
payments).
9) ₱15,000 debt, 15.5% nominal compounded semi-annually. Six
semiannual payments; first payment

after 2 years

Interpretation used (write this): Semiannual rate i=\tfrac{0.155}{2}=0.0775. First payment occurs
after 2 years → 4 semiannual periods deferred. n=6 payments. So payments occur at times
2.0y, 2.5y, …, 4.5y. Time of debt = 4.5 years (last payment at 4.5 years).

Formula (deferred annuity):

PV = PMT\cdot\left(\frac{1-(1+i)^{-n}}{i}\right)\cdot(1+i)^{-m}

Solve for PMT:

PMT = PV\cdot\frac{(1+i)^{m}}{\dfrac{1-(1+i)^{-n}}{i}}

where m = number of periods deferred (here m=4).

Data: PV=15{,}000,\ i=0.0775,\ m=4,\ n=6.

Compute:

a_{\overline{n}|i}=\frac{1-(1+i)^{-n}}{i}\quad\Rightarrow\quad a_{\overline{6}|0.0775}\approx
4.65815054

(1+i)^m=(1.0775)^4\approx 1.1693319

PMT=15{,}000\cdot\frac{1.1693319}{4.65815054}=\mathbf{₱4{,}340.57}

Time of debt: First payment at 2.0 years; 6 payments every 0.5 years → last payment at 2 +
(6-1)\times0.5 = 4.5 years. Time of debt = 4.5 years.

Amortization schedule (copy this table):

(Balance at time of first payment = PV × (1+i)^4 = balance just before Period 1)

Period Payment (₱) Interest (₱) Principal (₱) Balance after

payment (₱)
 1 4,340.57 1,566.98 2,773.60 17,445.44

2 4,340.57 1,352.02 2,988.55 14,456.89

3 4,340.57 1,120.41 3,220.16 11,236.73

4 4,340.57 870.85 3,469.72 7,767.01

5 4,340.57 601.94 3,738.63 4,028.38

6 4,340.57 312.20 4,028.37 0.00

(Interest each period = previous balance × 0.0775; Principal = Payment − Interest; last line
adjusted to clear balance.)