INFLATION

1. An item presently costs P1000. If inflation is at the rate of 8% per year, what will be the costs of
the item in two years? FC= P1166.40
2. An economy is experiencing inflation at an annual rate of 8%. If this continues, what will P1000
be worth two years from now in terms of today’s pesos? F=P857.34
3. A man invested P10,000 at an interest rate of 10% compounded annually. What will be the final
amount of his investment in terms of today’s pesos, after 5 years, if inflation remains the same at
the rate of 8% per year? F=P10,960.86
4. What will be the price of a $20,000 car in 5 years if the inflation rate is 6%?
5. A certain product cost P1,000. If an inflation is at the rate of 8.6% per year. What will be the cost
of it after 3 years?
6. What will be the equivalent amount of P1,000 after 5 years, if the inflation rate remains at 8%
per year?
7. A man invested P20,000 at an interest rate of 11% annually. What will be the amount after 5
years, if inflation rate remains at 8% per year?
8. A man invested P130,000 at an interest rate of 10% compounded annually. What will be the final
amount of his investment, in terms of peso, after 5 years, if inflation remains the same at the
rate of 8% per year? P142,491
9. What is the uninflated present worth of a P200,000 future value in two years if the average
inflation rate is 6% and interest rate is 10%. P=147,107
10. In year zero, you invest P10,000 in a 15% security for 5 years. During that time, the average
annual inflation is 6%. How much, in terms of year zero will be in the account at maturity.
11. Based on news report, it is predicted that there will be an average annual rate of inflation in
prices of commodities of 8.2% during the next 10 years. Assuming this prediction to be accurate,
a motorcycle currently costing P51,000 now would what price 10 years hence?
12. A real estate broker stated that a house be sold in 1980 for P37,000 and was sold by the buyer
for P90,000 in 1990. If the increase in price is due solely to inflation, determine the average rate
of inflation between 1980 and 1990.
13. What is the future amount of my P100,000 after 5 years if I invest today at a rate of 12%
compounded annually. Inflation rate if 8% per year. What is the effective rate given to the
account?
14. A company invest P100,000 today to be repaid in 5 years in one lump sum at 12% compounded
annually. If the rate of inflation is 3% compounded annually, approximately how much profit, in
present day pesos, is realized over the 5 years?
15. In 1960, the average value of a house is P300,000 in 2010, the average on the average of the
same model is P2,132,000. What was the rate of inflation of the house? f=4%
16.
ANNUITIES

1. Mrs. Lexi decides to set aside P500 at the end of each month for her child’s college education. If
the child were to be born today, how much will be available for its college education when she
turns 19 years old? Assume an interest rate of 5% compounded monthly? F=P189,673.36
2. What is the present worth and the accumulated amount of a 20-year annuity paying P5,000 at
the end of each year with the interest of 15% compounded annually. P=P31,196.66
F=P512,217.91
3. A man brought an equipment costing P60,000 payable in 12 quarterly payments each period.
The rate of interest is 24% compounded quarterly. What is the amount of each payment?
A=P6,751.53
4. Determine the present worth and the accumulated amount of an annuity consisting of 6
payments of P120,000 each, the payments are made at the beginning of each year. Money is
worth 15% compounded annually. P=P522,258.61 F=P1,328,015.90
5. Find the present value of P120,000 annuity payable every year for 10 years but deferred three
years money is worth 8% compounded annually. P=P495,958.13
6. If money is worth 6%, find the present value of a perpetuity of P70,000 payable at the beginning
of each year. P=P1,236,666.67
7. What present sum would be needed for an annual end of year payments of P250,000 each
forever if money is worth 15%? P=P1,666,666.67
8. P500,000 is deposited in savings account that pays 8% interest compounded semi-annually.
Equal annual withdrawals are to be made from the account beginning one year from now and
continuing forever. Compute the maximum amount of the equal annual withdrawals.
P=P40,800.00
9. Today, a businessman borrowed money to be paid in equal payments of P2000 at the end of
every three months for 3 years. if the interest rate is 10% compounded quarterly. How much did
he borrow?
10. If P500 is invested at the end of each year for 6 years at an effective annual interest rate of 7%.
What is the total amount available upon the deposit of the 6th payment?
11. What is the future worth of P600 deposited at the end of every month for 4 years if the interest
rate is 12% compounded quarterly?
12. What is the accumulated amount of five years annuity paying P6000 at the end of each year,
with interest at 15% compounded annually?
13. Mr. Cruz plans to deposit for the education of his 5-year-old son, P500 at the end of each month
for 10 years at 12% annual interest compounded monthly. The amount that will be available in
two years is?
14. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay 90% balance
on monthly installments for 60 months at an interest rate of 15% compounded monthly.
Compute the amount of the monthly payment.
15. A manufacturing firm wishes to give each 80 employees a holiday bonus. How much is needed to
invest monthly in a year at 12% nominal interest rate, compounded monthly, so that each
employee will receive a P2000 bonus.
16. How much money must you invest today in order to withdraw P2000 annually for 10 years if the
interest rate is 9%?
17. Maintenance cost of an equipment is P20,000 for 2 years, P40,000 at the end of 4 years and
P80,000 at the end of 8 years. Compute for the semi-annual amount that be set aside for this
equipment. Money worth 10% compounded annually?
18. Mr. Ramirez borrowed P15,000 two years ago. The terms on the loan are 10% interest for 10
years with uniform payments. He just made his second annual payment. How much principal
does he still owe? https://youtu.be/MrwQMG6hrao?si=6XRIA2o5ob_cblGF
19. A man inherited a regular endowment of P100,000 every end of 3 months for X-years. However,
he may choose to get a single lump oh P3,702,939.80 at the end of 4 years. If the rate of interest
is 14% compounded quarterly. What is the value of X? (notebook)
20. A machine is under consideration for investment. The cost of the machine is P25,000. Each year
it operates, the machine will generate savings of P15,000. Given an effective annual rate of 18%,
what is the discounted payback period (in years) on the investment in the machine? (notebook)
21. If P500 is deposited in an account at the beginning of each year for 6 years at an annual interest
rate of 7%, how much can be withdrawn after 6 years? (notebook)
22. A man owes P10,000 with interest at 6% payable semi-annually. What equal payments at the
beginning of each 6 months for 8 years will discharge his debt? (notebook)
23. At what rate payable quarterly will payment of P500 at the beginning of each 3 months of 7
years discharge a debt of P12,000 due immediately? (notebook)
24. A certain property is being sold and the owner receives two bids. The first bidder offered to pay
P400,000 each year for 5 years, each payment is to be made at the beginning of each year. The
second bidder offered to pay P240,000 for the first year, P360,000 for the 2 nd year, and P540,000
for each year for the next 3 years. All payments will be made at the beginning of each year. If
money is worth 20% compounded annually. Which bid should the owner of the property accept?
(notebook)
25. On the day his grandson was born, a man deposited to a trust company a sufficient amount of
money so that the boy could receive five annual payments of P10,000 each for his college tuition
fees, starting from his 18th birthday. Interest at the rate of 12% per annum was to be paid on all
amounts of deposit. There was also a provision that the grandson could elect to withdraw no
annual payments and receive a single lump amount on his 25 th birthday. The grandson chose this
option:
A) How much did the boy receive as the single payment?
B) How much did the grandfather deposit?
26. A debt of P40,000 whose interest rate is 15% compounded semi-annually is to be discharge by a
series of 10 semi-annual payments made at the end of each compounding period. The first
payment to be made six months after consummation of the loan. The first six payments will be
P6,000 each, while the remaining 4 payments will be equal and such amount that the final
payment will liquidate the debt. What is the amount of the last 4 payments? (notebook)
27. A fund is to provide at annual scholarship at P4,000 for the first 5 years, P6000 for the next 5
years and P9000 thereafter. The fund will be established year before the scholarship is awarded.
If the fund earns 12% interest, what sum must be deposited? (notebook)
28.