1. You just inherited $10,000.
While you plan to squander some of it away, how
much should you deposit in an account earning 5% interest per year if you’d like
to have $10,000 in the account in 10 years? How much can you squander away?
2. Mr. Smith has saved $1,800 each year for 20 years. A year after the saving
period ended, Mr. Smith withdrew $7,500 each year for a period of 5 years. In the
sixth and seventh years, he only withdrew $5,000 per year. In the eighth year, he
decided to withdraw the remaining money in his account. If the interest rate was
6% per year throughout the whole period, what was the amount he withdrew at
the end of the eighth year?
3. The Lopez Group has two proposed operating systems to charge and track toll
fees. The first operating system has a cost of P150,000 and an additional cost of
P50,000 after 10 years. The annual software maintenance contract cost is
P5,000 for the first 4 years and P8,000 thereafter. In addition, there is expected
to be recurring major upgrade cost of P15,000 every 13 years. The second
operating systems costs P100,000 annual software maintenance that costs
P4,000, additional repair of P10,000 every 5 years and a recurring major upgrade
cost of P20,000 every 11 years. Compare the capitalized cost of the two
proposed operating systems and choose what system to use. Assume i= 5%per
year.
4. Suppose that annual income from a rental property is expected to start at $1,300
per year and decrease at a uniform amount of $50 each year after the first year
for the 15-year expected life of the property. The investment cost is $8,000, and i
is 9% per year. Is this a good investment? Assume that the investment occurs at
time zero (now) and that the annual income is first received at the end of the
year.
