Activity for July 30, 2018 (50 PTS)

There are 5 more exercises for you to apply what we have discussed in class. It is in
multiple type so that you have a way to verify if your solution is correct. Therefore, you
need to show your solutions in a very clear manner. This will be graded ALL or
NOTHING, which means 0 or 10 PTS per item. Wrong solution but correct answer will
have 0 PTS.

1. Mr. J. Dela Cruz borrowed money from the bank. He received from the bank
P1,340.00 and promised to pay P1,500.00 at the end of 9 months. Determine the
simple interest rate and the corresponding discount rate or often referred to as
the “Banker’s Discount”.

A. 15.92% ; 13.73% B. 12.95% ; 17.33% C.18.28% ; 13.12% D. 19.25% ;

13.33%

2. A man borrowed from the bank under a promissory note that he signed in the
amount of P25000.00 for a period of 1year. He received only the amount of
P21,915.00 after the bank collected the advance interest and an additional
amount of P85.00 for notarial and inspection fees. What was the rate of interest
that the bank collected in advance?

A. 13.64% B. 16.43% C.18.37% D. 10.32%

3. At age 30 you invest $5,000 into a mutual fund. If the fund averages an 8%
annual return, your investment is worth how much at age 55?

A. $23,300 B. $34,240 C. $50,310 D. $344,570

4. An investment option is available with continuous compounding at 5% interest. If

you invest $8,000 now, how much interest income will you earn if you cash out in
3.5 years?

A. $1,172 B. $1,261 C. $1,490 D. $1,530

5. It is the practice of almost all bank in the Philippines that when they grant a loan,
the interest for 1 year is automatically deducted from the principal amount upon
release of money to a borrower. Let us therefore assume that you applied for a
loan with the bank and the P80000 was approved at an interest rate of 14% of
which P11200 was deducted and you were given ac check of P68800. Since you
have to pay the amount of P80000 one year after, what then will be the effective
interest rate?

A. 16.28% B. 17.30% C. 38.51% D. 39.31%