Solve the following problems. Round off the final answers to two decimal places. 1. A debt of P150,000 with interest payable annually at the rate of 4% will be retired at the end of 10 years through the accumulation of a sinking fund invested at 3%. At what equivalent amortization rate could the debtor agree to pay off his debt by equal payments including all interest and principal at the end of each year for 10 years? 2. A debt of P120,000 is made with the agreement that interest shall be paid semi- annually, at the rate of 6%, and that principal shall be paid in one installment at the end of 4 years. a) Under the sinking fund method, what is the semi-annual expense of the debt if the debtor invests his fund at 4% compounded semi- annually? b) Find the semi-annual expense of the debt if it were to be discharged, principal and interest included at 6% payable semi-annually, by equal payments at the end of each 6 months for 4 years. 3. Construct a sinking fund schedule for problem number 2. 4. A house cost P300,000. The buyer pays P150,000 cash and agrees to discharge the balance by payments of P3,500 at the end of each month. If money is worth 7% compounded monthly, find: a) number of -regular payments; b) date when the fund, first exceed P300,000; c) final payment on the day of the last regular payment; d) final payment one period after the last regular payment; e) the outstanding principal after the 10th period. 5. A debt of P250,000 is to be repaid after 5 years. If the interest is charged at 5% compounded semi-annually, a sinking fund is created at a rate of 6% compounded semi-annually. Find: a) the semi-annual cost by the sinking fund method; b) the semi-annual cost by amortization; c) Did the borrower made the right decision in setting up a sinking fund? Justify your answer. Solve the following problems. Round off the final answers to two decimal places. 1. A debt of P150,000 with interest payable annually at the rate of 4% will be retired at the end of 10 years through the accumulation of a sinking fund invested at 3%. At what equivalent amortization rate could the debtor agree to pay off his debt by equal payments including all interest and principal at the end of each year for 10 years? 2. A debt of P120,000 is made with the agreement that interest shall be paid semi- annually, at the rate of 6%, and that principal shall be paid in one installment at the end of 4 years. a) Under the sinking fund method, what is the semi-annual expense of the debt if the debtor invests his fund at 4% compounded semi- annually? b) Find the semi-annual expense of the debt if it were to be discharged, principal and interest included at 6% payable semi-annually, by equal payments at the end of each 6 months for 4 years. 3. Construct a sinking fund schedule for problem number 2. 4. A house cost P300,000. The buyer pays P150,000 cash and agrees to discharge the balance by payments of P3,500 at the end of each month. If money is worth 7% compounded monthly, find: a) number of -regular payments; b) date when the fund, first exceed P300,000; c) final payment on the day of the last regular payment; d) final payment one period after the last regular payment; e) the outstanding principal after the 10th period. 5. A debt of P250,000 is to be repaid after 5 years. If the interest is charged at 5% compounded semi-annually, a sinking fund is created at a rate of 6% compounded semi-annually. Find: a) the semi-annual cost by the sinking fund method; b) the semi-annual cost by amortization; c) Did the borrower made the right decision in setting up a sinking fund? Justify your
