Assessment Task 7

1. A debt of P3,500 is to be amortized by 6 equal semiannual payments with interest at

6% compounded semiannually. Find the periodic payment and construct on
amortization schedule.

Solution:
i = 3%
n=6

𝑆
𝑅𝑠 = [ ]
1 − (1 + 𝑖)−𝑛
𝑖

3,500
=[ ]
1 − (1 + 3)−6
3

3,500
=[ ]
0.162516
3
Rs = ₱ 646.09

Amortization Schedule
Payment # Principal Repaid Interest Paid Periodic Payment Unpaid Balance
1 541.09 105.00 646.09 3,500
2 557.32 88.77 646.09 2,958.91
3 574.04 72.05 646.09 2,401.59
4 591.26 54.83 646.09 1,827.55
5 609.00 37.09 646.09 1,236.29
6 627.29 18.82 646.09 627.29
3,500 376.56 3,876.56

2. Monthly payments of P800 each are used to settle a loan for 8 months at 8%
compounded monthly. Find the present value of the loan and construct an amortization
table.

Solution:
i = 0.67%
n=8
1 − (1 + 𝑖)−𝑛
𝐴 = 𝑅[ ]
𝑖
 1 − (1 + 0.67)−8
= 800 [ ]
0.67
1 + 0.9479806
= 800 [ ]
0.67
A = ₱ 6,211.27

Amortization Schedule
Payment # Principal Repaid Interest Paid Periodic Payment Unpaid Balance
1 758.59 41.41 800 6,211.27
2 763.65 36.35 800 5,452.80
3 768.74 31.26 800 4689.15
4 773.86 26.14 800 3,920.41
5 779.02 20.98 800 3,146.55
6 784.21 15.79 800 2,367.53
7 789.44 10.56 800 1,583.32
8 794.70 5.30 800 793.88
6,211.27 187.79 6,400

3. A sala set costs P6,800 cash. A buyer pays P2,500 down-payment and the balance will
be paid by equal monthly installment payments for 8 months with interest rate of 6%
compounded monthly. Find:

a. the monthly payments:

Solution:

i=½%
n=8

𝑆
𝑅𝑠 = [ ]
1 − (1 + 𝑖)−𝑛
𝑖

4,300
=[ ]
1 − (1 + 1/2)−8
1/2

4,300
=[ ]
0.039115
1/2
Rs = ₱ 549.66
b. construct an amortization schedule.

Amortization Schedule
Payment # Principal Repaid Interest Paid Periodic Payment Unpaid Balance
1 528.16 21.50 549.66 4,300
2 530.80 18.86 549.66 3,771.84
3 533.45 16.21 549.66 3,241.04
4 536.12 13.54 549.66 2,707.59
5 538.80 10.86 549.66 2,171.47
6 541.50 8.16 549.66 1,632.67
7 544.20 5.46 549.66 1,091.17
8 546.97 2.73 549.66 546.97
4,300 97.32 4,397.32

4. An obligation will be amortized by quarterly payments of P670 for 10 years. If interest is

at 6% compounded quarterly, find:

a. the present value of the loan;

Solution:

i=1½%
n = 40
1 − (1 + 𝑖)−𝑛
𝐴 = 𝑅[ ]
𝑖
1 − (1 + 1 1/2)−40
= 670 [ ]
1 1/2
1 + 0.551262
= 670 [ ]
1 1/2

A = ₱ 20,043.62

b. the outstanding principal after 7 years; the remaining liability just after the 30th
payment;

Solution:

n = 78
(1.015)28 − 1
= 20,043.62 (1.015)28 – 670 [ ]
0.015
= 30,410.62 − 23,102.59
= 7,308.03
 Outstanding principal after 30th payment:
(1.015)30 − 1
= 20,043.62 (1.015)30 – 670 [ ]
0.015

= ₱ 6,178.87

c. how much of the 20th payment is interest, and how much goes to principal?
Solution:

(1.015)19 − 1
= 20,043.62 (1.015)19 – 670 [ ]
0.015

= 11,993.10

Interest in 20th payment = 0.015 (11,993.10)

= ₱ 179.90

Principal in 20th payment = 670 – 179.90

= ₱ 490.10

5. A debt of P56,000, with interest at 5% compounded monthly, will be discharged, interest

included, by monthly payments of P500 for as long as necessary, Find:

a. the number of regular payments;

Solution:

i = 0.42 %
−1
𝑃𝑉 (𝑖)
𝑛 = 𝑙𝑛 [(1 − ) ] ÷ 𝑙𝑛 (1 + 𝑖)
𝑅𝑠
−1
56,000 (0.42 )
= 𝑙𝑛 [(1 − ) ] ÷ 𝑙𝑛 (1 + 0.42 )
500

n = 151

b. the outstanding principal after 4 years;

Solution:

n = 48
 (1.0041667)48 − 1
= 56,000 (1.0041667)48 – 500 [ ]
0.004166
= 68,370.25 − 26,507.46
Remaining debt = ₱ 41,862.79

c. the final or concluding payment.

Solution:
(1 + 𝑖)𝑛 − 1
𝑂𝑃 = 𝐴 (1 + 𝑖)𝑛 – 𝑅𝑠 [ ]
𝑖
(1.0041667)151 − 1
= 56,000 (1.0041667)151 – 500 [ ]
0.004166
= 104,921.37 − 104,831.51
OP = 89.86

I = OP x i
= 89.86 x 0.0042
I = 0.37

Concluding payment = OP + i
= 89.86 + 0.37
Concluding payment = ₱ 90.23

6. A man purchases a car for P65,000 and pays P20,000 down payment. The balance,
with interest at 5 1/2% compounded semiannually, will be amortized for the next 4 years.
Find:

a. the semiannual payment

Solution:

i=2¾%
n=8

𝑆
𝑅𝑠 = [ ]
1 − (1 + 𝑖)−𝑛
𝑖
 45,000
=[ ]
1 − (1 + 2 3/4)−8
2 3/4

45,000
=[ ]
0.195094
2 3/4
Rs = ₱ 6,343.11

b. the remaining debt at the end of 3 years;

Solution:

n=6
(1.0275)6 − 1
= 45,000 (1.0275)6 – 6,343.11 [ ]
0.0275
= 52,954.58 − 40,773.13
Remaining debt = ₱ 12,181.45

c. the OP just after the 5th payment.

Solution:

(1.0275)5 − 1
= 45,000 (1.0275)5 – 6,343.11 [ ]
0.0275
= 52,954.58 − 40,773.13
OP after 5th payment = ₱ 18,028.77

7. How much must a man place in a fund at the end of each month in order to have
P12,500 at the end of 4 years, if money is worth 7% compound monthly? Construct a
sinking fund table for 6 months.
Solution:

i = 0.58%
n = 48

𝑆
𝑅𝑠 = [ ]
(1 + 𝑖)𝑛 − 1
𝑖
 12,500
=[ ]
(1 + 0.58)48 − 1
0.58

12,500
=[ ]
0.319952
0.58
Rs = ₱ 226.60

Sinking Fund Schedule

Payment # Periodic Deposit Interest in Fund Increased in Fund Amount in Fund
1 226.41 0.00 226.41 2264.41
2 226.41 1.32 227.73 454.14
3 226.41 2.65 229.06 683.20
4 226.41 3.99 230.40 913.60
5 226.41 5.33 231.74 1145.34
6 226.41 6.68 233.09 1378.43

8. Construct a sinking fund table showing the growth of the fund over 5 years, if P950 is to
be deposited at a rate of 6% compounded semi-annually.

Sinking Fund Schedule

Payment # Periodic Deposit Interest in Fund Increased in Fund Amount in Fund
1 950 0.00 950 950
2 950 28.50 978.50 1,928.50
3 950 57.86 1,007.86 2,936.36
4 950 88.09 1,038.09 3,974.45
5 950 119.23 1,069.23 5,043.68
6 950 151.31 1,101.31 6,144.99
7 950 184.35 1,134.35 7,279.34
8 950 218.38 1,168.38 8,447.72
9 950 253.43 1,203.43 9,651.15
10 950 289.53 1,239.53 10,890.68

9. How much must be deposited in a fund at the end of each six months for 12 years to
raise P25,000 by the end of that time, if money is worth 5% compounded semiannually?
Make out the first six lines of the sinking.

Solution:

i=2½%
n = 24
 𝑆
𝑅𝑠 = [ ]
(1 + 𝑖)𝑛 − 1
𝑖

25,000
=[ ]
(1 + 0.58)48 − 1
0.58

12,500
=[ ]
0.319952
0.58
Rs = ₱ 772.82

Sinking Fund Schedule

Payment # Periodic Deposit Interest in Fund Increased in Fund Amount in Fund
1 772.82 0.00 772.82 772.82
2 772.82 19.32 792.14 1,564.96
3 772.82 39.12 811.94 2,376.90
4 772.82 59.42 832.24 3,209.14
5 772.82 80.23 853.05 4,062.19
6 772.82 101.55 874.37 4,936.56