Question

ANSWER THE FOLLOWING:

A)A sequence of quarterly payments o P6,267 each, with the first payment due at the end of 2 years and the last payment at the end of 13 years. Find the present worth of these payments if money is worth 5% compounded quarterly.

B)A manufacture borrows P2,211,340 with interest at 6% compounded monthly, and agrees to discharge the loan by a sequence of equal monthly payments for 4 years with the first payment at the beginning of the 4th year.  Find the periodic payment.

C)An investment in an oil field will yield no operating profit until the end of 4 years, when the investor will receive P268,615,876.  After that, he will receive P268,615,876 at the end of each year for 10 more years.  Find the present value of tis income if money is worth 6% effective.

D) . Find the present value of a series of quarterly payments of P950 each, the first payment is due at the end of 2 years and 3 months and the last at the end of 5 years and 6 months. If the money is worth 15% compounded quarterly.

Answer 1

A.Calculation of present worth of quartely payment of P 6,267

Since the first payment will be made after 2 years,hence first we need to calculate the present worth of payments at the end of 2nd year

n=11 years

C=P 6,267

r=0.05

m=no. of compunding period in a year=4

m*n=44 years

Present Value=C*Present value Annuity [email protected] for 44 years

=P 6,267*33.6864

=P 211,112.67

Now,Calculate the present value of P 211,112.67

n=2 years

m=4

r=0.05

Present value=Future value/(1+r/m)^m*n

=211,112.67/(1+0.05/4)^4*2

=P 191,141.08

Thus Present worth of qaurterly payment of P 6,267 is P191,141.08