Time Value Of Money

a. You are planning your retirement and you come to the conclusion that you need to have saved P1,250,000 in 30 years. You can invest into an retirement account that guarantees you a 5% annual return. How much do you have to put into your account at the end of each year to reach your retirement goal?
1 P 8 1, 3 1 4. 2 9 P 1 8 , 8 1 4 . 3 0 P 2 3, 3 4 6. 5 9 P 1 2, 3 8 2. 3 7

fund earns 7% compounded annually?

c. You set up a college fund in which you pay P2,000 each year at the beginning of the year. How much money will you have accumulated in the fund after 18 years, if your fund earns 7% compounded annually?
1 P 7 2 , 7 5 7 . 9 3

b. You set up a college fund in which you pay P2,000 each year at the end of the year. How much money will you have accumulated in the fund after 18 years, if your

P 6 7, 9 9 8. 0 7 P 2 0, 1 1 8. 1 7 P 2 8, 3 3 9. 2 5

7 , 1 2 8 . 2 7 P 7 2 3, 7 4 5. 4 9

d. When you retire you expect to live for another 30 years. During those 30 years you want to be able to withdraw P45,000 at the beginning of each year for living expenses. How much money do you have to have in your retirement account to make this happen. Assume that you can earn 8% on your investments.
1 P 1, 3 5 0, 0 0 0. 0 0 P 5 0 6, 6 0 0. 2 5 P 5 4

e. If you invested P2,000 in an account that pays 12% interest, compounded continuously, how much would be in the account in 5 years?
1 P 3, 5 2 4. 6 8 P 3 , 6 4 4 . 2 4 P 3, 5 8 1. 7 0 P 3, 2 0 0. 0 0

f.

You want to buy a new

plasma television in 3 years, when you think prices will have gone down to a more reasonable level. You anticipate that the television will cost you P2,500. If you can invest your money at 8% compounded monthly, how much do you need to put aside today? 1 P 1 , 8 9 5 . 3 7 2 P 1 , 9 6 8 . 1 4 3 P 1 , 9 8 4 . 5 8 4 P 2 , 1 5 8 . 4 2

g. You want to buy a new car. The car you picked will cost you P32,000 and you decide to go with the dealers financing offer of 5.9%

compounded monthly for 60 months. Unfortunately, you can only afford monthly loan payments of P300. However, the dealer allows you to pay off the rest of the loan in a one time lump sum payment at the end of the loan. How much do you have to pay to the dealer when the lump sum is due? 1 P 1 4 , 0 0 0 . 0 0 2 P 2 1 , 8 9 0 . 4 3 3 P 2 5 , 4 5 5 . 3 7 4 P 2 2 , 0 7 1 . 7 5

h.

You

are

planning

your

retirement and you come to the conclusion that you need to have saved P1,250,000 in 30 years. You can invest into an retirement account that guarantees you a 5% return. How much do you have to put into your account at the end of every month to reach your retirement goal? 1 P 1, 5 6 7. 8 6 2 P 1 , 5 0 1 . 9 4 3 P 3, 4 7 2. 2 2 4 P 2, 5 2 6. 2 7

3 5 . 9 5 P 4 8 3 . 9 0 P 6 1 4 . 8 3

j.

A young couple buys their dream house. After paying their down payment and closing costs, the couple has borrowed P400,000 from the bank. The terms of the mortgage are 30 years of monthly payments at an APR of 6% with monthly compounding. What is the monthly payment for the couple?
1 P 2 , 3 9 8 . 2 0 P 2, 4 2 1. 6 3 P 2, 6 9 7. 9 8

i.

You will receive a stream of annual P70 payments to begin at the end of year 0 until the final payment at the beginning of year 5. What amount will you have at the end of year 5 if you can invest all amounts at an 11% interest rate? 1 P 3 5 0 . 0 0 2 P 4

P 2, 7 0 0. 0 0

k. An athlete was offered the following contract for the next three years: Year Cash Flow l. million m. million n. million P5 P7 P9
4

The athlete would rather have his salary in equal amounts at the end of each of the three years. If the discount rate for the athlete is 10%, what yearly amount would she consider equivalent to the offered contract? i.P5.37 million per year ii.P5.70 million per year iii.P6.71 million per year iv.P6.87 million per year
o. If you deposit P9,000 at the end of each year in an account earning 8% interest, what will be the value of the account in 25 years? 1 P 6 0 0, 8 8 2. 8 3 2 P 6 5 7 , 9

5 3 . 4 6 P 7 1 0, 5 8 9. 7 4 P 7 1 9, 5 8 9. 7 4

p. You would like to retire with P1 million on your 60th birthday. If you start saving equal annual amounts on your 26th birthday, make your last deposit on your 60th birthday, and earn 10% interest on your money, how much must you invest each year to achieve your goal?
1 P 3, 3 4 3. 0 6 P 3, 4 3 6. 1 4 P 3, 5 5 8. 4 1 P 3

, 6 8 9 . 7 1

q.

Your firm rents office space for P250,000 per year, due at the beginning of each year. If your firm's hurdle rate is 10%, what is the present value of five years' worth of rent? 1 P 8 7 1, 7 1 3. 0 0 2 P 9 4 7, 6 9 6. 6 9 3 P 1 , 0 4 2 , 4 6 6 . 3 6 4 d. P 1, 2 5 0, 0 0 0. 0 0

bank account that pays 6% interest compounded quarterly, how much will you have in five years? 1 P 2 , 5 4 6 . 9 6 2 P 3 , 3 6 7 . 1 4 3 P 8 , 0 1 7 . 8 4 4 P 1 3 , 2 6 7 . 0 4 s. Calculate the annual payment for a 20-year mortgage on a P3.5 million building at a 7.5% interest rate. Assume that the entire building is financed and that payments are made at the end of each year, starting at the end of the first year and ending at the end of the 20th year.
1 P

r.

If you invest P2,500 in a

1 7 5, 0 0 0. 0 0 P 3 4 3 , 3 2 2 . 6 7 P 1 8 6, 2 9 3. 5 2 P 3 4 0, 8 1 5. 3 2