Time Value of Money

1.You just started your first job and you want to buy a house within 4 years. You are currently saving for the down payment. You plan to save Php5,000 the 1^st year. You also anticipate that the amount you save each year will rise by 12% a year as your salary increases over time. Interest rates are assumed to be 7% and all savings occur at year-end. How much money will you have for a down payment in 4 years?

2.An investment pays Php50 semi-annually for the next 2 years. The investment has a 10% nominal interest rate and interest is compounded quarterly. What is the future value of the investment?

3.The Jordan family is interested in buying a home. The family is applying for a Php500,000, 30-year mortgage. Under the terms of the mortgage, they will receive Php500,000 today to help purchase their home. The loan will be fully amortized over the next 30 years. Current mortgage rates are 7%. Interest is compounded monthly and all payments are due at the end of the month. What is the monthly mortgage payment?

4.Kristine U. has saved Php1 Mln and intends to use her savings as a down payment on a new car. After careful examination of her income and expenses, Kristine has concluded that the most she can afford to spend every month on her car payment is Php8,000. The car loan that Kristine uses to buy the car will have an APR of 10%. What is the price of the most expensive car that Kristine can afford she finances her new car for 48 months?

5.China Bank pays 4% interest, compounded annually, on time deposits. BPI pays 1.75% interest, compounded quarterly. In which bank would you prefer to deposit your money and at what rate?