SOLVED PROBLEMS

1. P 4000.00 is borrowed for 75 days at 16% per annum simple interest. How much will be
due at the end of 75 days?
2. Determine the exact and ordinary simple interests on P1,200 for the period from January
16 to November 26, 1992, if the rate of interest is 24%.
3. Determine the ordinary and exact simple interests on P5,500 for the period from January
5, 2002 to February 28, 2003, if the rate of interest is 6 ½ %.
4. A businessman borrows P34,200 for the period from October 14, 2002 to March 25,
2004 at 5 ½ % simple interest. What amount must he repay if the interest is computed
using (a) ordinary simple interest; (b) exact simple interest?
5. Compute the effective rate of interest compounding to each of the following interest
rate. If you invest your money, which would you prefer?
(a) 12% compounded semi-annually
(b) 12% compounded quarterly
(c) 12% compounded monthly
(d) 12% compounded bi-monthly
(e) 12% compounded daily
6. Mr. Cruz borrowed P1,000.00 and was able to sign a promissory note that he would pay
P2,032.79 after 4 years. How much is the nominal rate of interest and the corresponding
effective rate if money is computed bi-monthly.
7. How long will it take P800.00 to be four times in value if invested at the rate of 7%
compounded quarterly? What is the effective rate of interest?
8. What lump-sum amount of interest will be paid on a $10,000 loan that was made on
August 1, 2008, and repaid on November 1, 2012, with ordinary simple interest at 10%
per year?
9. You borrow $200 from a family member and agree to pay it back in six months. Because
you are part of the family, you are only being charged simple interest at the rate of 1%
per month. How much will you owe after six months? How much of this is interest?
10. What is the future equivalent of %1,000 invested at 8% simple interest per year of 2 ½
years?
11. Alexander Michael owes P25,000.00 due in 1 year and P75,000 due in 4 years. He agrees
to pay P50,000.00 today and the balance in 2 years. How much must he pay at the end
of two years if money is worth 5% compounded semi-annually?
12. A credit card company charges a nominal rate of 24% on overdue accounts,
compounded daily. What is the effective interest rate?
13. On his sixth birthday a boy is left an inheritance. The inheritance will be paid in a lump
sum of P100,000.00 on his 21st birthday. What is the present value of the inheritance as
of the boys sixth birthday, if the interest is 4% compounded annually?
14. A future amount (F) is equivalent to P1500.00 now when 8 years separates the amount
and the annual interest rate is 12%. What is the value of F?
15. A businessman wants to have P500,000 for 4 years from now. What amount should he
invest now if it will earn interest of 6% compounded quarterly for the first 2 years and
8% compounded semi-annually during the next 2 years?
16. What payment X, 10 years from now, is equivalent to a payment of P1,000 six years from
now, if interest is 15% compounded (a) annually and (b) monthly?
17. How much shoul I invest now on a bank that promises 6% interest rate on the first 5
years and 12% interest afterwards, if I should have P2,000,000 twenty years from now?
18. How much money was withdrawn from Mr. Castro’s account on the 5 th year, after
investing P25,000 on a bank that offers 12% interest, if he has P50,000 after 30 years?
19. A machine worth P50,000 is expected to last for 3 years. During its operation, a
maintenance cost of P1,000 is needed after the 1 st year of operation and P2,000 at the
end of the 2nd year. What present amount of money is required to operate the machine,
if money is worth 16% compounded quarterly?
20. Daniel withdrew P25,000 at the end of year 5, deposited P15,000 at the end of year 6,
and observed that he has P50,000 at the end of year 10. If money’s worth is 10%, how
much did he invest at the start?
21. Find the worth of money (P) on May 31, 2003 in the cash flow diagram appearing below,
if money is worth 12% compounded monthly? (Payments are made semi-annually).

P
0

0 1 2
0 0 0
22. A man borrows money from a bank that uses a simple discount rate of 14%, he signs a
promissory note promising to pay P500 at the end of 4 th, 6th, and 7th months
respectively. Determine the amount of money he received from the bank.
23. A man borrows P10,000 from a loan firm. The rate of simple interest is 15%, but the
interest is to be deducted from the loan at the time the money is borrowed. At the end
of one year he has to pay back P10,000. What is the actual rate of interest?
24. Maine Mendoza was granted a loan P20,000 by her employer CPM Industrial Fabricator
and Construction Corporation with an interest of 6% for 180 days on the principal
collected in advance. The corporation would accept a promissory note of P20,000 non-
interest for 180 days. If the discounted at once, find the proceeds of the note.
25. A bank charges 12% simple interest on a P300.00 loan. How much will be the repaid if
the loan is paid back in one lump sum after three years?
26. A deposit of P110,000 was made for 31 days. The net interest after deducting 20%
withholding tax is P890.36. find the rate of return annually.
27. Alden buys a television set from a merchant who ask P1,250 at the end of 60 days.
Alden wishes to pay immediately and the merchant offers to compute the cash price on
the assumption that the money is worth 8% simple interest. What is the cash price?
28. A man borrowed P20,000 from a local commercial bank which has a simple interest of
16% but the interest is to be deducted from the loan at the time that the money was
borrowed and the loan is payable at the end of one year. How much is the actual rate of
interest.
29. An interest rate is quoted as being 7.5% compounded quarterly. What Is the effective
annual interest rate?
30. A company invested P10,000 ti day to be repaid in 5 years in one lump sum at 12%
compounded annually. How much profit in present day pesos is realized?
31. A firm borrows P2000 for 6 years at 8%. At the end of 6 years, it renews the loan for the
amount due plus P2000 more for 2 years at 8%. What is the lump sum due?
32. How long (in years) will it take money to quadruple if it earns 7% compounded semi-
annually?
33. A company invests P10,000 today to be repaid in 5 years in one lump sum at 12%
compounded annually. How much profit in present day pesos is realized?
34. P200,000 was deposited on January 1, 1988 at an interest rate of 24% compounded
semi-annually. How much would the sum be on January 1, 1993?
35. If P500,000 is deposited at a rate of 11.25% compounded monthly, determine the
compound interest after 7 years and 9 months.
36. Fifteen years ago P1,000.00 was deposited in a bank account, and today it is worth
P2,370.00. The bank pays interest semi-annually. What was the interest rate paid in this
account?
37. If P5,000.00 shall accumulate for 10 years at 8% compounded quarterly, find the
compounded interest at the end of 10 years.
38. A sum of P1000 is invested now and left for eight years. At which time the principal is
withdrawn. The interest has accrued is left for another eight years. If the effective annual
interest rate is 5% what will be the withdrawal amount at the end of 16 th year?
39. A merchant puts in his P2000.00 to a small business for a period of six years. With a
given interest rate on the investment of 15% per year, compounded annually, how much
will he collect at the end of the sixth year?
40. P500,000 was deposited 20.15 years ago at an interest rate of 7% compounded semi-
annually. How much is the sum now?
41. In year zero, you invest P10,000.00 in a 15% security for 5 years. During that time, the
average annual inflation is 6%. How much, in terms of year zero pesos will be in the
account at maturity?
42. By the condition of a will, the sum of P20,000 is left to a girl to be held in trust fund by
her guardian until; it amounts to P50,000. When will the girl receive the money if the
fund is invested at 8% compounded quarterly?
43. What is the present worth of two P100 payments at the end of the third year and fourth
year? The annual interest rate is 8%.