This method consists of two steps:

Step 1: Find the compound amount at the end of the largest number of whole
period in the given term.
Step 2: Accumulate the result of step 1 for the remaining time (which is less than
a period) at simple interest, nominal rate.

Example 1. Find the compound amount if P10, 000 is invested for 3 years and 9 months at
12% compounded semi- annually, assuming simple interest over the final
fractional part.

Given: P = P10, 000 J = 12% m=2 t = 3 years and 9

months i = J/m n = tm
i = .12/2 = .06 = 6% n =(3 ¾ )(2) = 15/2 = 7 ½ periods
*t = n/m = 7.5/2 = 3.75 years (3 years and 9 months)

Solution:
F1 = P(1 + i)n
= P10, 000 (1 +. 06)7
= P10, 000
(1.503630259)
F1 = P15, 036. 30 F2 = P (1 + rt)
= P15, 036. 30 (1 + (.12) (3/12))
= P15, 036. 30 (1.03)
F2 = P15, 487. 39

Example 2. Accumulate P12, 200 at 13% compounded quarterly for 5 years and 5 months.

Given: P = P12, 200 J = 12% m=4 t = 5 years and 5

months i = J/m n = tm
i = .13/4 = .0325 = 3.25% n = (5 5/12) (4) = 65/3 = 21 2/3 periods

Remaining term: 2 months

*t = n/m = 21/4 = 5 ¼ years (5 years and 3 months)

1
Solution:
F1 = P(1 + i)n
= P12, 200 (1 +. 0325)21
=P12, 200 (1. 0325)21
= P12, 200 (1.957452657)
F1 = P23, 880. 92
F2 = P (1 + rt)
= P23, 880. 92 (1 + (.12) (3/12))
= P23, 880. 92 (1.03)
F2 = P23, 880. 92

Example 3. Find the compound amount and interest on P14, 800 in 4 years and 10 months
at 9% converted annually.

Given: P = P14, 800 J = 9% m = 1 t = 4 years and 10

months i = .09/1 = .06% = 9% n = mt
n = (1 )(4 10/12) = 4 5/6 = 29/6
n = (1) (29/6) = 29/6= 4 5/6 periods
Remaining term: 10 months
*t = n/m = 4/1 = 4 years

Solution:
F1 = P(1 + i)n
= P14, 800 (1 +. 09)4
=P14, 800 (1. 09)4
= P14, 800 (1.41158161)
F1 = P20, 891. 41

F2 = P (1 + rt)
= P20, 891. 41 (1 + (.09) (10/12))
= P20, 891. 41 (1.075)
F2 = P22, 458. 27

Example 4. On August 9, 2006, Miss Macatindig borrows P70, 000 and agrees to pay her
obligation on January 9, 2015, if interest is at 14% compounded quarterly. How
much will Miss Macatindig pay to discharge her obligation on January 9, 2015.

Given: P = P70, 000 J = 14% m=4 t = August 9, 2006

January 9, 2015
i = .14/4 = .035 = 3.5% = 8 years and 5
months n = (4) (101/12) = 101/3 = 33 2/3 periods = 8 5/12
Remaining months: 2 months
*t = n/m = 33/4 = 8 ¼ years (8 years and 3 months)

Solution:
F1 = P(1 + i)n
= P70, 000 (1 +. 035)33
= P70, 000(1. 035)33
= P70, 000(3.11942352)
F1 = P217, 835. 96

F2 = P (1 + rt)
=P217, 835. 96 (1 + (.14) (2/12))
=P217, 835. 96 (1.075)
F2 = P222, 918. 80
2
Example 5. Find the amount due on P50, 000 in 4 years and 4 months at 10 ½ % compounded
semi- annually

Given: P = P70, 000 J = 14% m=2 t = 4 years and 4

months i = .105/2 = .0525 = 5.25% n = tm
n = (4 4/12) 2 = 2 (13/3) = 26/3 = 8 2/3 periods
Remaining term: 4 months
*t = n/m
= 33/4 = 8 ¼ years (8 years and 3 months)

Solution:
F1 = P(1 + i)n
= P70, 000 (1 +. 035)33
=P70, 000 (1. 035)33
= P70, 000 (3.11942352)
F1= P217, 835. 96

F2 = P (1 + rt)
=P217, 835. 96 (1 + (.14) (2/12))
=P217, 835. 96 (1.075)
F2= P222, 918. 80

3
 Exercise 2.3
Compound Discount Amount at a Fraction of a Period

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Find the amount due on P45, 500 in 3 years and 8 months

at a.) 12 ¼% compounded annually
b.) 14%compounded annually
c.) 15%compounded semi- annually

2. What amount will pay a loan of P55, 000 on November 11, 2011, if the loan is made on
March 11, 2004 at a rate of 15% compounded quarterly?

3. How much will be repaid on November 27, 2007on a loan of P60, 000 made on February
27, 2006 with interest rate 12 ½ % compounded annually.

4. On April 26, 2007, Mr. Tokong borrowed P30, 500 which is to be repaid on the maturity
date. if he was charged 11 ½ % compounded semi- annually by the lender, how much
will he repay on January 27, 2015?

5. Find the compound amount and the interest on P25, 000 at 16% compounded semi-
annually in 8 years and 5 months.

6. Accumulate P14, 500 at 13% compounded quarterly for 5 years and 5 months.

7. Determine the compound amount if P90, 000 is invested in a cooperative paying

36% compounded monthly for 6 years and 6 months.

8. Teena borrowed P54, 000 at 16 ½ % compounded quarterly on January 10, 2000. How
much will she repay on October 10, 2010?

9. JC invested P170, 000 for 8 years and 10 months at 20% compounded quarterly. What
is its maturity value at the end of the term?

10. May Den borrows P43, 000 for 5 years and 3 months at 10.5 % compounded quarterly.
How much will she repay at the end of the term?

4
Lesson 2.4 Present Value at a Fraction of a Period

In a formula for the present value of compound interest P = F (1 + i)−n, the number n is
always taken as a whole number. Like the compound amount, there are some cases wherein the
obtained value n will not result to a whole number.

Objective: At the end of the lesson the students should be able to solve present value at a
fraction of a period where n is not a whole number.

The usual practice is computing the present value at a fraction of a period consists of the
following steps.
1. Increase the number of a whole period by one. Using this new period, discount F.
This means we have to add few months to complete the fractional part to one period.
2. Accumulate the result in Step 1 at simple interest, at nominal rate, for the
compounded quarterly.

Example 1. Find the present value of P25, 000 due in 3 years and 4 months at
11% compounded quarterly.

Given: F = P25, 000 J = 11% m=4 t = 3 years and 4 months

i = .11/4 = .0275 = 2.75% n = tm
n = (3 4/12) (4)
= (10/3) 4 = 40/3 = 13 1/3 periods
Additional term: 2 months
*t = n/m = 14/4 = 3.5 = 3 years and 6 months
Solution:
P1 = F(1 + i)−n
= P25, 000 (1 +. 0275)−14
=P25, 000 (1. 0275)−14
= P25, 000 (.683997276)
P1= P17, 099. 93191

P2 = P1 (1 + rt)
= P17, 099. 93191 (1 + (.11) (2/12))
= P17, 099. 93191 (1+ 018333333)
P2= P17, 413. 43066

Example 2. Discount P11, 560 for 3 years and 10 months at 6% compounded annually.

Given: F = P11, 560 J = 6% m=1 t = 3 years and 10

months i = .06/1 = .06 = 6% n = tm
n = (3 10/12) (1) = 46/12
= (23/6) (1) = 5 5/6 periods
Additional term: 2 months
*t = n/m = 4/1 =4years
Solution:
P1 = F(1 + i)−n
= P11, 560 (1 +. 06)−4
=P11, 560 (1. 06)−4
= P11, 560 (.792093663)
P1 = P9, 156. 60

P2 = P1 (1 + rt)
= P9, 156. 60 (1 + (.06) (2/12))
= P9, 156. 60 (1+ .01)
= P9, 156. 60 (1.01)
P2 = P9, 248. 17

5
Example 3. Discount P37, 200 for 4 years and 3 months at 12% compounded semi- annually.

Given: F = P37, 200 J = 12% m=2 t = 4 years and 3

months i = .12/2 = .06 = 6% n = tm
n = (17/4) (2) = 17/2 = 8 ½ periods
Additional term: 3 months
*t = n/m = 9/2 = 4.5 (4 years and 6 months)

Solution:
P1 = F(1 + i)−n
= P37, 200 (1 +. 06)−9
=P37, 200 (1. 06)−9
= P37, 200(.591898463)
P1= P22, 018. 62

P2 = P1 (1 + rt)
= P22, 018. 62 (1 + (.06) (3/12))
= P22, 018. 62 (1+ .03)
= P22, 018. 62 (1.03)
P2 = P22, 679. 18

Example 4. If money is worth 12% compounded annually, find the present value of P20, 500
due at the end of 6 years and 2 months.

Given: F = P20, 500 J = 12% m=1 t = 6 years and 2

months i = J/m n = tm
= .12/1 = .12 = 12% n = 6.16 (1)
n = 6 1/6 periods

Additional term: 10 months

*t = n/m = 7/1 = 7 years

Solution:
P1 = F(1 + i)−n
= P20, 500 (1 +. 12)−7
=P20, 500 (1. 12)−7
= P20, 500 (.452349215)
P1 = P9, 273. 16

P2 = P1 (1 + rt)
= P9, 273. 16 (1 + (.12) (10/12))
= P9, 273. 16 (1.1)
P2 = P10, 200.48

6
Example 5. If money is worth 8% converted annually, find the present value of P39, 500 due
at the end of 7 years and 7 months

Given: F = P39, 500 J = 8% m=1 t = 7 years and 7

months i = J/m n = tm
i = .08/1 = .08 n = (7 7/12) (1) = 91/12 = 7 7/12 periods

Additional term: 5 months

*t = n/m = 8/1 = 8 years

Solution:
P1 = F(1 + i)−n
= P39, 500 (1 +. 08)−8
=P39, 500(1. 08)−8
= P39, 500(.540268884)
P1 = P21, 340. 62

P2 = P1 (1 + rt)
= P21, 340. 62 (1 + (.08) (5/12))
= P21, 340. 62 (1.03333333)
P2 = P22, 051. 97
.

7
 Exercise 2.4
Present Value at a Fraction of a Period

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Discount P45, 500 for 5 years and 7 months, with interest at 12% compounded quarterly.

2. Discount P22, 000 for 7 years and 4 months, with interest at 9. 75% compounded quarterly.

3. Discount P28, 700 for 10 years and 3 months with interest at 8 ½ % compounded annually.

4. If money is worth 9% compounded semi- annually, find the present value of P40, 000
due at the end of 9 years and 9 months.

5. What sum of money will Betcha accept from her creditor on June 1, 2005 to settle a debt
of P33, 000 due on July 1, 2013, if the rate is 8% compounded semi- annually?

6. Pekwa owes Geena P34, 400 due on May 1, 2011. How much did Pekwa receive from
Geena on September 1 2006 to settle the debt if it is agreed that money is worth 11%
compounded quarterly?

7. On January 12, 2010, P55, 000 is due. What is the value of this obligation on June 12,
2006 at 8% compounded quarterly?

8. A P60, 000 is to be repaid on August 11, 2010. If it was loaned at 12% compounded
quarterly, How much loan was applied and accepted on April 11, 2006?

9. If I want to have P150, 000 in 5 years and 6 months from today. How much should I
invest in a fund paying 12% compounded every 3 months?

10. Tito borrows a certain amount of money and promised to pay P25, 500 at the end of 2
years and 3 months. If the interest is charged at 15% compounded every 6 months. How
much was borrowed?

8
Lesson 2.5 Term of the Compound Amount

The term of an investment refers to how long will certain sum of money to amount to a
certain other sum if it is invested at an interest rate.

Objective: At the end of the lesson the students should be able to specify the term of an investment.

The term of interest can be determined if the amount of investment, the principal and the
rate of interest compounded in m times per year are given.

The formula can be derived from formula for the compound amount:
F = P(1 + i)n, divide both sides of the equation by P,

F = (1 + i)n, get the logarithm of both sides of the equation.

P

log (F/P) = log (1 + i)n, by properties of logarithm,

n log (1 + i) = log F/P ; divide both side of the equation by log (1

+i) n = log F/P

log (1 + i)

Example 1. How long will it take for P22, 500 to accumulate to P40, 000 if it is invested at
15% compounded monthly?

Given: P = P22, 500 F = P40, 000 J = 15% m = 12

i = j/m
i = .15/12 = .0125 = 1.25%
Solution:
n = log F/P to solve for the term in years,
log (1 + i) *t -= n/m
= log P40, 000/ P22, 500 t = 46. 31621703
log (1 + .0125) 12
= log 1.777777778 t =3. 859684753 or 3.9 years
log 1.0125
= .249877473
.005395032
= 46.31621703

Example 2. In how many years will P28, 500 amount to P40, 634. 19 at 12%
compounded quarterly?

Given: P = P28, 500 F = P40, 634. 19 J = 12% m=4

i = J/m
i = .12/4 = .03
Solution:
n = log F/P
log (1 +
i)
= log P40, 634. 19/ P28, 500
log (1 + .03)
= log 1.425761053
log 1.03
= .154046747
.012837224
= 12. 00002703

9
 t = n/m = 12. 00002703/ 4 t = 3 years
Example 3. In what time P30, 000 amount to P38, 977. 07 at 10.75% compounded semi-
annually?

Given: P = P30, 000 F = P38, 977. 07 J = 10. 75% m=2

i = J/m
= .1075/2 = .05375 = 5.375%
Solution:
n = log F/P
log (1 + i)
= log P38, 977. 07/ P30, 000
log (1 + .05375)
= log 1. 299235667
log 1.05375
= .113687934
.022737587
= 4. 99999956

t = n/m = 4. 99999978/2 = 2. 499999978 t = 2.5 years

10
 Exercise 2.5
Term of Compound Amount

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. How long would it take P50, 000 to amount P120, 000 if invested at
15% compounded quarterly?

2. Ms. Tumangi receives a loan of P50, 000 with interest at 16% converted semi-
annually. She promised to pay the bank in full on the day when P1,200, 000 will be
due. When will Mrs. Tumangi pay the bank?

3. In how many years will P23, 000 amount to P34,278. 70 if it is invested at 9.5%
compounded quarterly?

4. Tokleng received a loan of P18, 790 with interest at 7% compounded quarterly.

She promises to pay her creditor in full on the day when P26, 583. 68 will be due.
How long will it take for Tokleng to pay the debt?

5. Find the term of an investment of P18, 250 if it increases to P20, 558. 50 if

invested at 6% compounded quarterly.

6. When is P15, 963. 47 due if its present value is P12, 475 when money is worth 9%
compounded monthly?

7. Teteng borrowed P17, 000 from Pitong with the agreement that the interest to be
charged is 12% compounded monthly. When is the loan due if the maturity value
is P30, 883. 84?

8. On February 6, 2006, Deena has P200, 000 in a fund, which earns interest at 14%
compounded quarterly. She plans to go into a business as soon as the fund contains
P346, 797. 21. On what date will the amount be available?

9. How long will it take for 10, 500 to amount P12, 762. 82 if invested at
10% compounded semi- annually?

10. If P20, 000 is invested on May 4, 2006 at 15 1/8% compounded quarterly, at what
date will it grows to P52, 505. 27?

11
Lesson 2.6 Rate of Compound Amount

There are some cases wherein we asked to determine for the interest rate. The interest
rate per conversion period can be determined when the compound amount, the term of
investment and the maturity or accumulated value are known.

Objective: At the end of the lesson the students should be able to solve the interest rate of the
compound amount.

In the formula F = P(1 + i)n, the interest rate can be determined if F, P and n are given.

From: F = P(1 + i)n

F = P(1 + i)n
P P

( F)1/n = (1 + i ) n (1/n)
P

1 + i = (F )1/n
P

i = ( F )1/n - 1
P
From: i = j/ m ; J=mi

J = m ( ( F )1/n - 1 ) x 100 %
P

Example 1. Hat annual interest rate compounded quarterly would be needed for P15, 000
` accumulate to P35, 000 in 5 years?

Given: F = P35, 000 P = P15, 000 m=4 t = 5 years

n = tm
= 4 (5) = 20 periods
Solution:
J = m ( ( F )1/n - 1 ) x 100 %
P
= 4 ( ( P35, 000)1/20 - 1 ) x 100 %
P15, 000
= 4 (1.043275093) - 1 ) x 100 %
= 4 ( .043275093) x 100 %
= .173100372 x 100%
J = 17. 31%

12
Example 2. What interest rate compounded semi- annually will P15, 000 amount to
P21, 127. 68 in 3 years?

Given: F = P21, 127. 68 P = P15, 000 m=2 t = 3 years

n = tm
= 2 (3) = 6 periods

Solution:
J = m ( ( F )1/n - 1) x 100 %
P
= 2 ( (P21, 127. 68)1/6 - 1) x 100 %
P15, 000
= 2 (1.408512 )1/6 - 1 ) x 100 %
= 2 ( .058750004) x 100 %
= .117500009 x 100%
J = 11. 75%

Example 3. What compounded quarterly will P16, 700 amount to P26, 136. 72 in 3 years and
9 months?

Given: F = P26, 136. 72 P = P16, 700 m = 4 t = 3 years and 9

months n = tm
=(3.75) (4) = 15 periods
Solution:
J = m ( ( F )1/n - 1 ) x 100 %
P
= 4 ( (P26, 136. 72)1/15 - 1) x 100 %
P16, 700
= 4 (1.565073054)1/15 - 1 ) x 100 %
= 4 ( 1.030312513) - 1 x 100 %
= 4 ( .030312513 ) x 100 %
= .121250051
J = 12.125% or 12 1/8%

13
 Exercise 2.6
Rate of the Compound Amount

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Determine the rate compounded annually if P6, 500 is the present value of P8, 000 due
in 5 years.

2. If P19, 770 is the present value of P22, 650 for 7 years and 4 months. What is the
rate compounded monthly?

3. Determine the rate compounded quarterly if P12, 122. 85 is the compound amount of
P8, 000 invested for 5 years.

4. At what rate compounded semi- annually will P19, 750 accumulate to P24, 120. 77 in
two years?

5. Upeng placed P34, 400 in an investment firm. If this amount to P58, 872. 52 after 4
years and 6 months, find the rate used if it is compounded monthly.

6. If P23, 850 amounts to P30, 247. 57 in 3 ¼ years. What is the rate of

interest compounded quarterly?

7. At what rate compounded semi- annually will P15, 300 accumulate to P21, 159. 90 in 2
years and 6 months?

8. Find the interest rate converted monthly for an amount P33, 457. 78 due in 3 years and
3 months in which the present value is P25, 000.

9. A debtor borrows P13, 500 and agrees to pay P16, 243. 28 for his debt 2 years and
3 months from now. At what rate compounded monthly is he paying the interest?

10. If P25, 000 earned an interest of P3, 000 in 2 years, at what rate compounded annually
was the money invested

14