Practice question
A valid written agreement capitalizes PHP1,000 of due unpaid conventional interest into PHP10,000 principal, then charges two-percent annual interest on the resulting principal. For the next complete year, assuming the rate is otherwise enforceable, what is the interest?
- PHP220 on PHP11,000
- PHP200 because capitalization can never be effective
- PHP20 because only prior interest counts
- PHP2,200
- Zero solely because interest was capitalized
Legal references
- Civil Code RA386: https://lawphil.net/statutes/repacts/ra1949/ra_386_1949.html Articles1958–1959,2212.
- Nacar v Gallery Frames GR189871 August13,2013 MAIN: https://lawphil.net/judjuris/juri2013/aug2013/gr_189871_2013.html Final monetary judgment interest.
- Lara’s Gifts v Midtown GR225433 September20,2022 MAIN resolution: https://lawphil.net/judjuris/juri2022/sep2022/gr_225433_2022.html MAIN compensatory-interest framework and final monetary award.
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