QUIZ 3. Read the instructions carefully. Put your answers in ½ lengthwise yellow paper.

Don’t forget to write your name and section. STRICTLY NO ERASURES. Use ballpen for your final answer.

I. Problem Solving. Round off your answers to 2 decimal places.

1. Find the future value of P12,000 accumulated at 3 ½ % simple interest for 9 months.
2. Find the proceeds after a P2,000 maturity value is discounted at 8% simple discount for 2 years.
3. Find the future value if P150,000 is deposited in a bank that pays 12% annual interest, compounded annually, for
3 years.
4. Find the present value of P245,000, which is due in 2 years and 9 months with 8% interest, compounded
quarterly
5. Mr. A deposits P3,500 every end of month at a bank that credits 2.4% annual interest. Find the maturity value
after 6 months if interest is compounded monthly.
6. Find the present value of P2,500 quarterly payments at the end of each quarter for 2 years and 9 months with
4.5% annual interest, compounded quarterly.
7. An investment of P1,500 is made at the beginning of each year for 8 years. Find the total investment at the end
of the term if money is worth 4.6% compounded annually.
8. Find the present value of 8 equal monthly payments of P1,200 payable at the beginning of each month at 6%
annual rate, compounded monthly.

II. Multiple choice. Write the capital letter of the correct answer.

1. In 2 years you are to receive $10,000. If the discount rate were to suddenly decrease, the present value of that
future amount to you would __________.
a. fall c. remain unchanged
b. rise d. cannot be determined

2. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totaling $1,500
would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively.
a. 700, 500, 300 c. 500, 500, 500
b. 300, 500, 700 d. All of the above cash flows are the same

3. To increase a given future value, the rate to be used should be __________.

a. increased c. zero
b. decreased d. cannot be determined

4. You are considering borrowing $100,000 for 30 years at a compound annual interest rate of 9 percent. The loan
agreement calls for 30 equal annual payments, to be paid at the end of each of the next 30 years. What is the
annual payment that will fully amortize the loan?
a. $3,333.33 c. $9,733.63
b. $6,400.30 d. $12,333.33

5. A security pays $2500 at the start of each quarter for 3 years. Given that the annual discount rate compounded
quarterly is 8%, which of the following is most likely to be the worth of the security today?
a. $18,840 c. $26,967
b. $22,438 d. $30,888

6. Suppose you make an investment of $1,000. This first year the investment returns 12%, the second year it
returns 6%, and the third year in returns 8%. How much would this investment be worth, assuming no
withdrawals are made?
a. $1,282 c. $1,421
b. $1,300 d. $1,568

7. An investor plans to buy a property worth $200,000 for which he has agreed to 20 percent today as down
payment. The remainder will be in the form of monthly payments over the next 15 years at 9 percent per year
compounded monthly. Which of the following is most likely to be the monthly payment?
a. $1,137. c. $1,623
b. $1,440. d. $1,845
 8. Interest paid (earned) on only the original principal borrowed (lent) is often referred to as __________.
a. present value c. future value
b. simple interest d. compound interest

9. Interest paid (earned) on both the original principal borrowed (lent) and previous interest earned is often
referred to as __________.
a. present value c. future value
b. simple interest d. compound interest

10. You have just graduated and have decided to purchase a brand new sports costing $26,000 car to enjoy your
newfound freedom. In the meantime, you have enough cash to make the 15% down payment, the remaining
85% balance to be financed through a loan. The loan will be payable in 60 monthly payments at a 9 percent
annual rate, compounded monthly, with the first payment due 1 month from today. What will be your monthly
payment for the loan?
a. $539.71 c. $233.33
b. $458.76 d. $368.33

11. You won a contest at a local business that has paid you a single $5,000. At 22, you have decided to invest
these funds for 45 years until you retire. During this time your account will earn 13%, compounded annually,
every year. As soon as you retire (exactly 45 years from today) you will start withdrawing retirement funds every
year for an additional 33 years, but the rate at this time is at 8% compounded annually. How much can you
withdraw each year in retirement?
a. $23,306
b. $106,237
c. $282,201
d. $1,223,207

12. Which of the following will decrease the present value of the mixed cash flows for years 1 through 5 of $1,000;
$4,000; $9,000; $5,000; and $2,000 respectively given a 10% discount rate?
a. Decrease the discount rate by 2%.
b. Switch cash flows for years 1 and 5 so that year 1 is $2,000 and year 5 is $1,000.
c. Switch cash flows for years 2 and 4 so that year 2 is $5,000 and year 4 is $4,000.
d. Switch cash flows for years 2 and 5 so that year 2 is $2,000 and year 5 is $4,000.

BONUS (2 pts @ .50 each):

What is your Management Science Professor’s full name?

_________ ______________ _____ _____________

First Name M.I. Last Name