Additional Activities
Decide on the following problems by determining the fair market value. Show
your solutions in a sheet of paper together with your decision on the problem.
1. Investment in Sunrise Company is P 100,000 at the end of 5 years plus
P 24,000 annually for 4 years afterwards. Investment in XYZ company
offers P 50,000 semi-annually P 15,000 every 6 months after 6 years.
Assume that the money is worth 9% compounded annually, which
investment is preferable?
2. A motorcycle is for sale P 60,500 cash or on installment terms P 3,000
per month for 2 years at 12% compounded annually. If you were the
buyer, what would you prefer, cash or installment?

Question

Answered

Sagot :

Kimmy0598go Kimmy0598go · Answer 1

Answer:

2. i prefer cash

Step-by-step explanation:

if you buy motorcycle in cash P 60,500 but in installment you will pay a total of P 80,427 in 2 years.

solving for rate of interest :.

(1+0.12)-1=(1+r/12)¹² so r=11.39%

solving for total amount of money to be paid in 2 years:

[tex]f = \frac{3000((1 + \frac{0.1139}{12} ) {}^{2 \times 12} - 1) }{ \frac{0.1138}{12} } [/tex]

F=80427 for investment

F=60500 for cash

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