Question

In: Economics

Compound Interest 12.) A merchant puts in his P25,000 to a small business for a period...

Compound Interest

12.) A merchant puts in his P25,000 to a small business for a period of 12 years. With a given interest rate on the investment of 1% compounded annually, how much will he collect at the end of the sixth year?

13.) How much must be invested on December 21, 2012 in order to accumulate P654,321 on December 21, 2017? Money is worth 7%.

14.) How much should you put into a 1% savings account in order to have P 1,000 in five years?

15.) A couple decided that for every child that will be born, they will place a deposit in the bank so that on the child’s 18th birthday, the child will receive an amount of P150,000. If the bank will pay an interest of 16% compounded yearly, how much deposit will the couple have to make on the birth of the child?

Solutions

Expert Solution

12) Interest rate = 1%

Amount deposited = 25,000

Duration = 12 years

Future value of Investment after 6 years = 25,000 * (1 + 0.01)^6 = 26,538

13) Money is worth = 7%

Duration of deposit = 5 years

Let Amount Invested be X

654,321 = X * (1 + 0.07)^5

X = 466,521.83

14) Interest rate = 1%

Let say amount deposited be Y

1,000 = Y * (1 + 0.01)^5

Y = 951.47

15) Amount received after 18 years = 150,000

Interest rate = 16%

Let say amount deposited be Z

Duration of Deposit = 18 years

150,000 = Z * (1 + 0.16)^18

Z = 10,371.64


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