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in prayer, believe that

you have received it,

and it will be yours.

Engr. John Ryan D. Regalario

Sample Problem 1

1. It is defined as the production and consumption

of goods and services of a community regarded as

a whole.

B. Economy D. Market Situation

Sample Problem 1

1. It is defined as the production and consumption

of goods and services of a community regarded as

a whole.

B. Economy D. Market Situation

I. SIMPLE INTEREST

Ordinary Simple Interest

Sample Problem 2

2. What is the Ordinary Simple Interest of P3000 for

6 months and 15 days if the rate of interest is 10%?

A. P3163 C. P162.50

B. P251.25 D. P110.50

Sample Problem 2

2. What is the Ordinary Simple Interest of P3000 for

6 months and 15 days if the rate of interest is 10%?

A. P3163 C. P162.50

B. P251.25 D. P110.50

Sample Problem 3

3. A loan of P5,000 is made for a period of 15 months,

at a simple interest rate of 15%, what future amount

is due at the end of the loan period?

B. P6, 110.00 D. P5, 937.50

Sample Problem 3

3. A loan of P5,000 is made for a period of 15 months,

at a simple interest rate of 15%, what future amount

is due at the end of the loan period?

B. P6, 110.00 D. P5, 397.50

Sample Problem 4

4. You loan from a loan firm an amount of P100,000

with a rate of simple interest of 20% but the interest

was deducted from the loan at the time the money

was borrowed. If at the end of one year, you have to

pay the full amount of P100,000, what is the actual

rate of interest.

A. 15% C. 23%

B. 25% D. 18%

Sample Problem 4

4. You loan from a loan firm an amount of P100,000

with a rate of simple interest of 20% but the interest

was deducted from the loan at the time the money

was borrowed. If at the end of one year, you have to

pay the full amount of P100,000, what is the actual

rate of interest.

A. 15% C. 23%

B. 25% D. 18%

SIMPLE INTEREST

Exact Simple Interest

SIMPLE INTEREST

Exact Simple Interest

Note:

Leap years occur every

four years, except for years

ending in 00 that are not

divisible by 400.

Sample Problem 5

5. Calculate for the exact simple interest on P15,000

for the period from February 12, to August 15, 2004 if

the rate of simple interest is 12%.

A. P909.84 C. P540.35

B. P678.87 D. P887.65

Sample Problem 5

5. Calculate for the exact simple interest on P15,000

for the period from February 12, to August 15, 2004 if

the rate of simple interest is 12%.

A. P909.84 C. P540.35

B. P678.87 D. P887.65

II. RATES OF INTEREST

Nominal Rate of Interest (NRI):

Nominal rate of interest specifies the rate of interest and

the number of interest periods per year.

Effective Rate of Interest (ERI):

Equivalent rates

For two nominal rates to be equal, their effective

rates must be equal.

Sample Problem 6

6. What is the effective rate corresponding to 18%

compounded daily? Take 1 year is equal to 360

days.

A. 13.56% C. 19.72%

B. 16.77% D. 21.25%

Sample Problem 6

6. What is the effective rate corresponding to 18%

compounded daily? Take 1 year is equal to 360

days.

A. 13.56% C. 19.72%

B. 16.77% D. 21.25%

Sample Problem 7

7. What nominal rate, compounded semi-annually,

yields the same amount as 16% compounded

quarterly?

A. 15.43% C. 16.32%

B. 12.75% D. 17.46%

Sample Problem 7

7. What nominal rate, compounded semi-annually,

yields the same amount as 16% compounded

quarterly?

A. 15.43% C. 16.32%

B. 12.75% D. 17.46%

III. COMPOUND INTEREST

Future Worth, F:

Where: (for both cases)

F = future worth

P = Present worth

i = Effective interest rate per

interest period (per month,

Present Worth, P: per quarter, per year, etc)

n = Total number of

compounding periods

m = mode of compounding

r = specified nominal rate

t = number of years

For Continuous Compounding

( )

F = P enr Future Worth

( )

P = F e -nr Pr esent Worth

Sample Problem 8

8. The amount of P50,000 was deposited in the bank

earning an interest of 7.5% per annum. Determine

the total amount at the end of 5 years, if the

principal and interest were not withdrawn during

the period.

B. P71,781.47 D. P60,694.46

Sample Problem 8

8. The amount of P50,000 was deposited in the bank

earning an interest of 7.5% per annum. Determine

the total amount at the end of 5 years, if the

principal and interest were not withdrawn during

the period.

B. P71,781.47 D. P60,694.46

Sample Problem 9

9. The sum of P20,000 is left to Robert as a will,

however, with a condition that the sum will be held

in a trust fund until it amounts to P50,000. When

will Robert receive the money if the fund is invested

at 8% compounded quarterly?

A. 11 C. 13

B. 12 D. 14

Sample Problem 9

9. The sum of P20,000 is left to Robert as a will,

however, with a condition that the sum will be held

in a trust fund until it amounts to P50,000. When

will Robert receive the money if the fund is invested

at 8% compounded quarterly?

A. 11 C. 13

B. 12 D. 14

Sample Problem 10

10. A sum of P1,000 is invested now and left for eight

years, at which time the principal is withdrawn. The

interest has accrued is left for another eight years.

If the effective annual interest rate is 5%, what will

be the withdrawal amount at the end of the 16th

year?

A. P356.85 C. P835.12

B. P562.35 D. P705.42

Sample Problem 10

10. A sum of P1,000 is invested now and left for eight

years, at which time the principal is withdrawn. The

interest has accrued is left for another eight years.

If the effective annual interest rate is 5%, what will

be the withdrawal amount at the end of the 16th

year?

A. P356.85 C. P835.12

B. P562.35 D. P705.42

Sample Problem 11

11. What would be the present value of instalment

payments of P1,000 now, P2,000 at the end of the

first year, P3,000 at the end of the second year,

P4,000 at the end of the third year and P5,000 at the

end of the fourth year, if money is worth 10%

compounded annually.

A. P12,315.87 C. P11,717.85

B. P14,115.76 D. P10,550.25

Sample Problem 11

11. What would be the present value of instalment

payments of P1,000 now, P2,000 at the end of the

first year, P3,000 at the end of the second year,

P4,000 at the end of the third year and P5,000 at the

end of the fourth year, if money is worth 10%

compounded annually.

A. P12,315.87 C. P11,717.85

B. P14,115.76 D. P10,550.25

Sample Problem 12

12. On his 6th birthday a boy is left an inheritance.

The inheritance will be paid in a lump sum of

P10,000 on his 21st birthday. What is the present

value of the inheritance as of the boys 6th birthday,

if the interest is compounded quarterly?

Assume i = 4%.

A. P5,552.64 C. P5,352.25

B. P5,504.50 D. P5,981.57

Sample Problem 12

12. On his 6th birthday a boy is left an inheritance.

The inheritance will be paid in a lump sum of

P10,000 on his 21st birthday. What is the present

value of the inheritance as of the boys 6th birthday,

if the interest is compounded quarterly?

Assume i = 4%.

A. P5,552.64 C. P5,352.25

B. P5,504.50 D. P5,981.57

Sample Problem 13

13. If the nominal interest rate is 5% percent, how

much is P3000 worth in 15 years in a continuously

compounded account?

A. P6,351 C. P6,117

B. P6,250 D. P6,562

Sample Problem 13

13. If the nominal interest rate is 5% percent, how

much is P3000 worth in 15 years in a continuously

compounded account?

A. P6,351 C. P6,117

B. P6,250 D. P6,562

Sample Problem 14

14. How long will it take money to double itself if

invested at 5% compounded annually?

A. 13 years C. 15 years

B. 14 years D. 16 years

Sample Problem 14

14. How long will it take money to double itself if

invested at 5% compounded annually?

A. 13 years C. 15 years

B. 14 years D. 16 years

Sample Problem 15

15. How long will it take for an investment to triple

its amount if invested at an interest rate of 12%

compounded semi-annually?

B. 9.43 years D. 6.6 years

Sample Problem 15

15. How long will it take for an investment to triple

its amount if invested at an interest rate of 12%

compounded semi-annually?

B. 9.43 years D. 6.6 years

IV. Annuities

Annuity is a series of equal payments A made

at equal intervals of time..

Ordinary Annuity

- the type of annuity where the payments are made at

the end of each period

Future Worth of Ordinary Annuity:

A

( 1 + i ) - 1

n

F=

i

Present Worth of Ordinary Annuity:

A

( )

-n

P=

1 - 1 + i

i

Annuity Due

- is the type of annuity where the payment is made at

the beginning of each period

Future Worth of Annuity Due:

A

( 1 + i ) - 1

n

F=

i

Present Worth of Annuity Due:

A

( ) ( 1 + i )

-n

P=

1 - 1 + i

i

Deferred annuity

- is the type of annuity where the first payment is made

later than the first or is made several periods after the

beginning of the annuity.

Future Worth of Deferred Annuity:

A

( 1 + i ) - 1

n

F=

i

Present Worth of Deferred Annuity:

A

1 - ( 1 + i ) ( 1 + i )

-n -m

P=

i

Perpetuity

- is an annuity in which the periodic payments

continue indefinitely.

Present Worth of Perpetuity:

Sample Problem 16

16. Today, a businessman borrowed money to be

paid in 10 equal payments for 10 quarters. If the

interest rate is 10% compounded quarterly and the

quarterly payment is P2,000, how much did he

borrow?

A. P16,350.2 C. P13,436.8

B. P10,852.5 D. P17,504.1

Sample Problem 16

16. Today, a businessman borrowed money to be

paid in 10 equal payments for 10 quarters. If the

interest rate is 10% compounded quarterly and the

quarterly payment is P2,000, how much did he

borrow?

A. P16,350.2 C. P13,436.8

B. P10,852.5 D. P17,504.1

Sample Problem 17

17. Mr. Ayala borrows P100,000 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. P870.4 C. P892.3

B. P839.2 D. P821.8

Sample Problem 17

17. Mr. Ayala borrows P100,000 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. P870.4 C. P892.3

B. P839.2 D. P821.8

Sample Problem 18

18. A person buys a piece of lot for P100,000 down

payment and 10 deferred semi-annual payments of

P8,000 each, starting three years from now. What is

the present value of the investment if the rate of

interest is 12% compounded semi-annually?

A. P144,000 C. P135,000

B. P156,000 D. P187,000

Sample Problem 18

18. A person buys a piece of lot for P100,000 down

payment and 10 deferred semi-annual payments of

P8,000 each, starting three years from now. What is

the present value of the investment if the rate of

interest is 12% compounded semi-annually?

A. P144,000 C. P135,000

B. P156,000 D. P187,000

V. Capitalized Costs

Capitalized Cost refers to the present worth of a

property that is assumed to last forever. The capitalized

cost of any property is the sum of the first cost and

the present costs of perpetual replacement,

operation and maintenance.

Capitalized Costs

Capitalized Costs

Capitalized Costs

Sample Problem 19

19. At 6%, find the capitalized cost of a bridge whose

cost is P250M and life is 20 years, if the bridge must

be partially rebuilt at a cost of P100M at the end of

each 20 years.

A. P315.2M C. P295.3M

B. P275.8M D. P135.6M

Sample Problem 19

19. At 6%, find the capitalized cost of a bridge whose

cost is P250M and life is 20 years, if the bridge must

be partially rebuilt at a cost of P100M at the end of

each 20 years.

A. P315.2M C. P295.3M

B. P275.8M D. P135.6M

Sample Problem 20

20. An equipment is purchased for P50,000. If the

annual maintenance cost is P1500, determine the

capitalized cost of perpetual service with an

interest rate of 6%.

A. P100,000 C. P25,000

B. P75,000 D. P58,333.33

Sample Problem 20

20. An equipment is purchased for P50,000. If the

annual maintenance cost is P1500, determine the

capitalized cost of perpetual service with an

interest rate of 6%.

A. P100,000 C. P25,000

B. P75,000 D. P58,333.33

VI. Depreciation

Depreciation is the decrease in the value of physical

property due to passage of time.

Methods of Computing Depreciation

Straight Line Method

Straight line method of depreciation assumes

that the loss in value of the property is directly

proportional to the age of the property.

Methods of Computing Depreciation

Sinking Fund Method

Methods of Computing Depreciation

Declining Balance Method

Methods of Computing Depreciation

Double Declining Balance Method

Methods of Computing Depreciation

Sum of the - years digits Method (SYD)

Sample Problem 21

21. An engineer bought a machine for P500,000.

Other expenses including installation amounted to

P30,000. At the end of its estimated useful life of 10

years, the salvage value will be 10% of the first cost.

Using straight line method of depreciation, what is

the book value after 5 years?

A. P256,400 C. P350,250

B. P291,500 D. P450,500

Sample Problem 21

21. An engineer bought a machine for P500,000.

Other expenses including installation amounted to

P30,000. At the end of its estimated useful life of 10

years, the salvage value will be 10% of the first cost.

Using straight line method of depreciation, what is

the book value after 5 years?

A. P256,400 C. P350,250

B. P291,500 D. P450,500

Sample Problem 22

22. A printing equipment costs P 73,500 has a life

expectancy of 8 yrs. and has a salvage value of P

3500 at the end of its life. The book value at the end

of x years is equal to P 38,500. Using straight line

method of depreciation, solve for the value of x.

A. 3 years C. 5 years

B. 4 years D. 6 years

Sample Problem 22

22. A printing equipment costs P 73,500 has a life

expectancy of 8 yrs. and has a salvage value of P

3500 at the end of its life. The book value at the end

of x years is equal to P 38,500. Using straight line

method of depreciation, solve for the value of x.

A. 3 years C. 5 years

B. 4 years D. 6 years

Sample Problem 23

23. A machine worth P250,000 has an estimated life

of 15 years with a book value of P30,000 at the end

of the period. Compute the depreciation charge and

its book value after 10 years using declining

balance method.

A. P60,822 C. P65,344

B. P63,455 D. P54,632

Sample Problem 23

23. A machine worth P250,000 has an estimated life

of 15 years with a book value of P30,000 at the end

of the period. Compute the depreciation charge and

its book value after 10 years using declining

balance method.

A. P60,822 C. P65,344

B. P63,455 D. P54,632

Sample Problem 24

24. An asset is purchased for P120,000. Its

estimated economic life is 10 years, after which it

will be sold for P12,000. Find the depreciation for

the 3rd year using the sum-of-the-years digit (SYD)

method.

A. P19,636 C. P15,710

B. P21,352 D. P12,345

Sample Problem 24

24. An asset is purchased for P120,000. Its

estimated economic life is 10 years, after which it

will be sold for P12,000. Find the depreciation for

the 3rd year using the sum-of-the-years digit (SYD)

method.

A. P19,636 C. P15,710

B. P21,352 D. P12,345

Thank You!!!

VII. BONDS

usually for a period not less than ten years and

guaranteed by a mortgage on certain assets of the

corporation or its subsidiaries

Bond Value

The value of a bond is the present worth of all future

amounts that are expected to be received through

ownership of the bonds.

C

(

P = Fr

1 + i ) - 1 C

n

+

Fr Fr Fr Fr Fr Fr Fr

( ) ( )

n n

i 1 + i

1 + i

Where:

F = face, or par, value P

r = bond rate per period

n = number of periods before redemption

I = investment rate per period

P= value of the bond n periods before redemption

Sample Problem 26

A man wants to make 14% nominal interest

compounded semi-annually on a bond

investment. How much should he be willing to

pay now for a 12%, P10,000- bond that will mature

in 10 years and pays interest semi-annually?

A. P8,950 C. P7,890

B. P8,590 D. P7,950

Sample Problem 26

A man wants to make 14% nominal interest

compounded semi-annually on a bond

investment. How much should he be willing to

pay now for a 12%, P10,000- bond that will mature

in 10 years and pays interest semi-annually?

A. P8,950 C. P7,890

B. P8,590 D. P7,950

VIII. Break-even Analysis

Sample Problem 27

A manufacturer produces certain items at a labor cost

per unit of P315, material cost per unit of P100, and a

variable cost of P3.00 per unit. If the item has a selling

price of P995, how many units must be manufactured

each month for the manufacturer to break even if the

monthly overhead is P461,600.

A. 500

B. 700

C. 600

D. 800

Sample Problem 27

A manufacturer produces certain items at a labor cost

per unit of P315, material cost per unit of P100, and a

variable cost of P3.00 per unit. If the item has a selling

price of P995, how many units must be manufactured

each month for the manufacturer to break even if the

monthly overhead is P461,600.

A. 500

B. 700

C. 600

D. 800

Sample Problem 28

ABC Corporation manufactures book cases that sells for

P65.00 each. It costs ABC P35,000 per year to operate its

plant. This sum includes rent, depreciation charges on

equipment and salary payments. If the cost to produce

one bookcase is P50, how many bookcases must be sold

each year for ABC to avoid taking a loss?

A. 2334 C. 3234

B. 3243 D. 2344

Sample Problem 28

ABC Corporation manufactures book cases that sells for

P65.00 each. It costs ABC P35,000 per year to operate its

plant. This sum includes rent, depreciation charges on

equipment and salary payments. If the cost to produce

one bookcase is P50, how many bookcases must be sold

each year for ABC to avoid taking a loss?

A. 2334 C. 3234

B. 3243 D. 2344

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