Question

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.

NO TO EXCEL SOLUTION. MANUAL SOLUTION PLS, THANK YOU

Answer 1

a)

PV of Annuity = P*[1-{(1+i)^-n}]/i

Where, P = Annuity = 6267, i = Interest Rate = 0.05/4 = 0.0125, n = Number of Periods = end of 2nd year to end of 13th year = (11*4)+1 = 45

PV at the end of 1 year and 3 quarters from now = 6267*[1-{(1+0.0125)^-45}]/0.0125 = 6267*0.428227/0.0125 = $214695.94

PV of above amount as on today = Future Value/[(1+Interest Rate)^Number of Periods = 214695.94/[(1+0.0125)^7] = 214695.94/1.09085 = $196815.19

Note: As per Guidelines, we are supposed to answer ONLY 1 QUESTION.