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BES4 Assignment4

The document contains 4 sample problems solving for various financial calculations like the number of years until a dam pays for itself, how much money needs to be set aside each year to have a certain amount after retirement, the price paid for a computer under an installment plan, and the equal periodic payments needed to pay off a debt over time. For each problem, the relevant financial variables like principal, interest rate, and time period are given, and the solution shows the mathematical steps and calculations to determine the unknown amount.

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865 views

BES4 Assignment4

The document contains 4 sample problems solving for various financial calculations like the number of years until a dam pays for itself, how much money needs to be set aside each year to have a certain amount after retirement, the price paid for a computer under an installment plan, and the equal periodic payments needed to pay off a debt over time. For each problem, the relevant financial variables like principal, interest rate, and time period are given, and the solution shows the mathematical steps and calculations to determine the unknown amount.

Uploaded by

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© © All Rights Reserved
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NAME: RONIEL JOSEPH PURCIA ASSIGNMENT 3

COURSE & SEC: BSCE – 2A BES4


PROFESSOR: ENGR. OTILIA TADUYO OCTOBER 7, 2021
BES 4 BSCE-2A Assignment4. Annuities 07 October 2021
P4-02 (C.E. Beard, November 1978)
The average annual cost of damages caused by floods to a certain subdivision located along the Pasig River
is estimated at P700,000. To build a gravity dam to protect the area from floods would cost
Php2,500,000.00 and would involve an annual cost of P20,000. With interest at 8% compounded annually,
how many years will takes for the dam to pay for itself?
𝐺𝑖𝑣𝑒𝑛:
𝐹 = 𝑃2,500,000
𝐴 = 𝑃700,000
𝑖 = 8%
Solution:
𝐴(1 − (1 + 𝑖 )−𝑛 )
𝐹=
𝑖
700,000(1 − (1 + 0.08)−𝑛 )
2,500,000 =
0.08
(2,500,000)(0.08) 700,000(1 − (1 + 0.08)−𝑛 )
=
700,000 700,000
( ) −𝑛
0.29 = 1 − 1 + 0.08
0.71 = 1.08−𝑛
log(0.71)
𝑛=
log(1.08)
𝑛 = 4.5 𝑦𝑒𝑎𝑟𝑠 𝑖𝑡 𝑤𝑖𝑙𝑙 𝑡𝑎𝑘𝑒 𝑡𝑜 𝑝𝑎𝑦 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑑𝑎𝑚.

P4.03 E.E. Board, April 1981)


A man wishes to have P35,000 when he retires 15 years from now. If he can expect to receive 4% annual
interest, how much must he set aside beginning at the end of each of the 15 years?
𝑮𝒊𝒗𝒆𝒏:
𝐹 = 𝑃35,000
𝑖 = 4%
𝑛 = 15
𝐴 =?
Solution:
(1 + 𝑖 )𝑛 − 1 0.04
𝐹 = 𝐴( ) 𝐴 = 𝑃35,000 ( )
𝑖 (1 + 0.04)15 − 1
𝑖
𝐴 = 𝐹( ) 𝐴 = 𝑃1747.94 𝑖𝑠 𝑡ℎ𝑒 𝑎𝑚𝑜𝑢𝑛𝑡 ℎ𝑒 𝑠ℎ𝑜𝑢𝑙𝑑 𝑠𝑒𝑡 𝑎𝑠𝑖𝑑𝑒.
(1 + 𝑖 )𝑛 − 1
P4-10 (ECE Board, August 1978 and September 1984)
A man purchases a computer worth P15.000 with interest at 5% payable semiannually. He signed a
contract to pay P5, 000 and the balance principal and interest included, by equal payments at the
end of each 6 months for 10 years. At the end of 4 years this computer was sold to yield the investor
7% payable semi-annually. Find the price he paid.
𝑮𝒊𝒗𝒆𝒏:
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡 = 𝑃15,000
𝐷𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = 𝑃5,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 2.5% 𝑜𝑟 0.025
𝑁 = 20 𝑦𝑒𝑎𝑟𝑠 𝑆𝑜𝑙𝑢𝑡𝑖𝑜𝑛:

𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡 − 𝑑𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡


= 15,000 − 5,000
= 𝑃10,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡(𝑖)(𝑛)
= 10,000(0.025)(20)
= 𝑃5,000
𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 = 𝑙𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑚𝑜𝑢𝑛𝑡
= 10,000 + 5,000
= 𝑃15,000
𝑡ℎ𝑒𝑛,
𝑖
𝐴 = 𝑃( )
(1 + 𝑖)𝑛 − 1
0.07
𝐴 = 750(8)(12) ( )
(1 + 0.07)8 − 1
𝐴 = 𝑃7,017.68 𝑡𝑜𝑡𝑎𝑙 𝑡ℎ𝑎𝑡 ℎ𝑒 𝑝𝑎𝑖𝑑

P4-11 (ECE BOARD, August 1979)


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?
𝑮𝒊𝒗𝒆𝒏:
𝑃 = 𝑃10,000
𝑖 = 6%
𝑛 = 16
𝐴 =?
𝑺𝒐𝒍𝒖𝒕𝒊𝒐𝒏:
1 − (1 + 𝑖 )−𝑛
𝑃 = 𝐴( )
𝑖
𝑖
𝐴 = 𝑃( )
1 − (1 + 𝑖 )−𝑛
0.06
𝐴 = 𝑃10,000 ( )
1 − (1 + 0.06)−16
𝐴 = 𝑃989.52 𝑖𝑠 𝑡ℎ𝑒 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑎𝑡 𝑡ℎ𝑒 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑜𝑓 𝑒𝑎𝑐ℎ 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑓𝑜𝑟 8 𝑦𝑒𝑎𝑟𝑠.

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