Solve the following problems. Round off the final answers to two decimal places. 1. A promissory...

Transcribed Image Text:

Solve the following problems. Round off the final answers to two decimal places. 1. A promissory note requires Dan to pay P150,000 at the end of 2 years and 9 months. The creditor allows him to discharge the debt by paying P15,000 now. Find the rate compounded quarterly at which the creditor discounted the debt. At the time of the transaction, the market rate for safe investment for the time involved was (7%, m = 4). Was it a wise decision on the part of the creditor to allow Dan to discharge the debt by paying P15,000 now? Why? 2. If interest is at the rate of 4% compounded semi-annually, find how long it will take P5,100 to accumulate to P12,500. 3. If money is worth (5%, m = 4) which obligation is more valuable: a) P1,300 due at the end of 2 years; P1,250 due at the end of 4 years with accumulated interest from today at (0.05, m = 2). SPINALEN O O CENIAN PRE 2 DE JAN. 3336344 PRO 2015 2016 Solve the following problems. Round off the final answers to two decimal places. 1. A promissory note requires Dan to pay P150,000 at the end of 2 years and 9 months. The creditor allows him to discharge the debt by paying P15,000 now. Find the rate compounded quarterly at which the creditor discounted the debt. At the time of the transaction, the market rate for safe investment for the time involved was (7%, m = 4). Was it a wise decision on the part of the creditor to allow Dan to discharge the debt by paying P15,000 now? Why? 2. If interest is at the rate of 4% compounded semi-annually, find how long it will take P5,100 to accumulate to P12,500. 3. If money is worth (5%, m = 4) which obligation is more valuable: a) P1,300 due at the end of 2 years; P1,250 due at the end of 4 years with accumulated interest from today at (0.05, m = 2). SPINALEN O O CENIAN PRE 2 DE JAN. 3336344 PRO 2015 2016

Answer rating: 100% (QA)

1 We can use the formula for compound interest to find the rate at which the creditor discounted the debt FV PV1 rmmt Where FV future value of the deb... View the full answer