FINMAN2: ASSIGNMENT # 3: TIME VALUE OF MONEY: SPECIAL APPLICATIONS Note: Questions were obtained from various sources Ms.

Reena Almonte

Questions: 1. Special Problem: You have decided to endow a university with a scholarship. It is expected to cost PHP 200,000 per year to attend the university into perpetuity. You expect to give the endowment in 10 years & will accumulate it by making annual deposits into an account. The rate of interest is projected to be 10% p.a. A. How large must the endowment be? B. How much must you deposit at the end of each year for the next 10 years to obtain the required amount? 2. Special Problem: You are shopping for a used car. You found one priced at PHP 175,000. The dealer informed you that if you make a downpayment of PHP 25,000, he will finance the balance of the price at a 12% annual rate over 2 years (24 months). If you accept the offer, what will your monthly payment amount be? 3. Special Problem: You borrowed PHP 15,000 at a 14% annual rate of interest to be repaid in 3 years. The loan is amortized into 3 equal, annual, end-of-year payments. Prepare a loan amortization schedule. 4. You lend a friend PHP 10,000, for which your friend will repay you PHP 27,027 at the end of 5 years. What rate of interest are you charging you friend? 5. You lend a friend PHP 30,000, which your friend will repay in 5 equal payments of PHP 10,000, with the first payment to be received a year from now. What rate of return does your loan receive? 6. How many years will it take for PHP 100 to grow to PHP 298.60 if invested at 20% p.a.? 7. Special Problem: Determine how long it will take to repay a PHP 14,000 loan where annual instalments of PHP 2,450 are required given at interest rate of 9% p.a.

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