Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. A student deposited P7,000 into a savings account and the annual interest rate is 6
percent. How much is the interest after two years using the simple interest? If you using
the compound interest method, how much is the interest income after two years?
2. A college received a contribution to its fund of P2 million. They can never touch the
principal, but they can use the earning. At an assumed interest rate of 9.5 percent, how
much can the college earn to help its operations each year? How much can the college
earn if the interest income will be received after 3 years compounded annually?
3. Calculate the future value of P4,600 received today if it is deposited at 9 percent per
annum for three years.
4. Calculate the present value of P89,000 to be received in 15 years, assuming an
opportunity cost of 14 percent per year.
5. Tandang Sora has deposited P33,000 today in an account which will earn 10 percent
annually. She plans to leave the funds in this account for seven years earning interest.
If the goal of this deposit is to cover a future obligation of P65,000, what
recommendation would you make to Tandang Sora?
6. Pia Manufacturing Agents, Inc. is preparing a five-year plan. Today, sales are
P1,000,000. If the growth rate in sales is projected to be 10 percent over the next five
years, what is the amount of sales be in year five?
7. Gabriela will receive P12,000 per year for the next 10 years as royalty for her work on a
finance book. What is the present value using ordinary annuity of her royalty income if
the opportunity cost is 12 percent?
8. Katherine is investing in a business firm of P10,000 at the beginning of each year for the
next 8 years paying 20 percent interest. How much will Katherine have at the end of 8th
year of investment?
9. Daniel Plans to fund his individual retirement account, beginning at the end of each year
with 20 annual deposits of P2,000, which will continue for the next 20 years. If he can
earn an annual compound interest rate of 8 percent on his deposits, what will be the
amount in the account upon retirement?
10. You have been offered a project paying P1,000 at the beginning of each year for the
next 10 years. What is the maximum amount of money you have invest in this project if
you expect 9 percent rate of return to your investment?
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