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A house and lot can be acquired by a down payment of P338,458 and a yearly payment of P71,335 at the end of each year for a period of 28 years. If money is worth 11% compounded annually, what is the cash price (in peso) of the property?

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pedrocarratore

Answer:

P952,054.69

Explanation:

The present value of a property with a down payment 'D' and an annuity 'A', payed over a period of 'n' years at a rate 'i' is:

[tex]P = D +A*\frac{1-(1+i)^{-n}}{i} \\[/tex]

If D = 338,458; A = 71,335; n= 28 and i = 11%:

[tex]P = 338,458 +71,335*\frac{1-(1+0.11)^{-28}}{0.11}\\P=952,054.69[/tex]

The cash price (in peso) of the property is P952,054.69.

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