Mr. and Mrs. De Dios are planning to buy a new house despite of their limited budget. They seek advice from a bank for them to produce enough amount for the down payment of the house they have chosen. According to the bank if P 20,000 will be invested at the end of each year for 5 years in an account that pays interest at 10% compounded annually the couple will be able to have the amount for down payment. If there are 3 houses for sale offering a 10% down payment of the price which among these 3 houses is the best choice? House A - P850,740 House B- P1,221,020 House C- P2,110,000 For you to be able to determine the total amount of investment for the period of 5 years, you need to complete the table below. Calculate the amount to which the first to the fourth period P 20,000.00 will grow using the compound interest formula. Period Amount in Exponential Form Amount in Pesos 1 P20,000(1.01)* P 29, 282 4 P20,000 P 20,000 Total Note: The P 20,000 deposited at the end of the first year will draw interest for 4 years, so it will amount to P20,000(1.01)* . The P20,000 deposited at the end of the second year will draw interest for 3 years so it will amount to P20,000(1.01)³, and so on. 1. What pattern will be reflected in the 2nd column of the table? Discuss.
Mr. and Mrs. De Dios are planning to buy a new house despite of their limited budget. They seek advice from a bank for them to produce enough amount for the down payment of the house they have chosen. According to the bank if P 20,000 will be invested at the end of each year for 5 years in an account that pays interest at 10% compounded annually the couple will be able to have the amount for down payment. If there are 3 houses for sale offering a 10% down payment of the price which among these 3 houses is the best choice? House A - P850,740 House B- P1,221,020 House C- P2,110,000 For you to be able to determine the total amount of investment for the period of 5 years, you need to complete the table below. Calculate the amount to which the first to the fourth period P 20,000.00 will grow using the compound interest formula. Period Amount in Exponential Form Amount in Pesos 1 P20,000(1.01)* P 29, 282 4 P20,000 P 20,000 Total Note: The P 20,000 deposited at the end of the first year will draw interest for 4 years, so it will amount to P20,000(1.01)* . The P20,000 deposited at the end of the second year will draw interest for 3 years so it will amount to P20,000(1.01)³, and so on. 1. What pattern will be reflected in the 2nd column of the table? Discuss.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.12MCP
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Transcribed Image Text:WISE DECISION
Mr. and Mrs. De Dios are planning to buy a new house despite of their
limited budget. They seek advice from a bank for them to produce enough amount
for the down payment of the house they have chosen.
According to the bank if P 20,000 will be invested at the end of each year
for 5 years in an account that pays interest at 10% compounded annually the
couple will be able to have the amount for down payment.
If there are 3 houses for sale offering a 10% down payment of the price
which among these 3 houses is the best choice?
House A - P850,740
House B- P1,221,020
House C- P2,110,000
For you to be able to determine the total amount of investment for the period of
5 years, you need to complete the table below.
Calculate the amount to which the first to the fourth periodP 20,000.00 will grow
using the compound interest formula.
Period
Amount in Exponential Form
Amount in Pesos
1
P20,000(1.01)*
P 29, 282
P20,000
P 20,000
Total
Note: The P 20,000 deposited at the end of the first year will draw interest for 4
years, so it will amount to P20,000(1.01)* . The P20,000 deposited at the end of
the second year will draw interest for 3 years so it will amount to P20,000(1.01)3,
and so on.
1. What pattern will be reflected in the 2nd column of the table? Discuss.
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