GENERAL MATHEMATICS – GRADE 11

SOLVING COMPOUND INTEREST

I. Introduction

An initial amount of money, which is called the principal amount can be invested at a
certain interest rate that is earned at the end of a given term. If the interest rate is compounded,
the interest earned at the end of the period is added to the principal, and this new amount will
earn interest in the next period. The same process is repeated for each succeeding period.
Meaning, the interest previously earned will also earn interest in the next period.
In this learner’s packet, you will learn how to solve some problems in real world
involving compound interest.

II. Learning Objectives

At the end of this learner’s packet, you will be able to solve problems involving
compound interest. (M11GM-IIb-2)

III. Learning Activities

This learner’s packet will help you learn how to solve problems involving compound
interest specifically problems on compounding more than once a year.
In here, sample problems with step by step solutions on finding compound interest,
when compound interest is computed more than once a year, its maturity value, present value,
rate of interest and time are presented.

The following definitions or concepts and formulas will help you compute compound
interest (compounded more than once a year), maturity/future value, present value, rate of
interest and time or term.

Definition 1:
Compound Interest (Is)
– interest that is computed on the principal and also on the accumulated past
interests.
It can be computed using the formula:
Ic = F - P
where,
Ic = compound interest
P = principal
F = future value/maturity value

RO_General Mathematics_Grade 11_Q2_LP 2

1
 Definition 2:
Maturity value/Future Value (Compounding m times a year)
– amount after t years that the lender receives from the borrower on the
maturity date.
Formula for finding Maturity Value F in interest compounded more than once a year:
𝐢 𝐦𝐭 𝐢 𝒏
F = P + Ic or 𝐅 = 𝐏 𝟏 +
𝐦
or 𝐅 = 𝐏 𝟏 +
𝐦

where,
F = future value/maturity value
Ic = compound interest
P = principal
i = nominal rate or annual interest rate
m = frequency of conversion
t = time in years
n = mt

Definition 3:
Principal/present value (P) at Compound Interest
– amount of money borrowed or invested on the origin date.
Formula for finding present value P in interest compounded more than once a year:
𝐅 𝐅
P= 𝑖 mt or P= 𝑖 n
𝟏+ 𝟏+
𝑚 𝑚

where,
F = future value/maturity value
P = principal
i = nominal rate or annual interest rate
m = frequency of conversion
t = time in years
n = mt

Definition 4:
Number of conversion periods (n)

– refers to how often the interest is calculated over the term of the loan or
investment.
It can be computed using the formula:
𝐅
𝐥𝐨𝐠
𝐏
n = mt or n=
𝐥𝐨𝐠 (𝟏+𝐣)

where,
F = future value/maturity value
P = present value
m = frequency of conversion
t = time in years
i = nominal rate or annual interest rate
𝑖
j = periodic rate or j =
𝑚
n = total number of conversion periods
Note: The formula was derived from the formula for maturity value F :
𝐢 𝒏
𝐅 = 𝐏 𝟏 +
𝐦

RO_General Mathematics_Grade 11_Q2_LP 2

2
Definition 5:
Periodic Interest (j) – the interest for a specific period.
It can be computed using the formula:

𝐢 𝐧 𝐅
j= or j= − 𝟏
𝒎 𝐏

where,
F = future value/maturity value
P = Present value
j = periodic rate
i = nominal rate or annual interest rate
m = frequency of conversion
t = time in years
n = total number of conversion periods or n = mt
Note: The formula was derived from the formula for maturity value F :
𝐢 𝒏
𝐅 = 𝐏 𝟏 +
𝐦

To solve problems involving compound interest, where compound interest is computed more
than once a year, you must be guided with these steps:

Steps on Solving Problems Involving Compound Interest

1. What is/are given? (Identify the given data in the problem.)

2. What is asked? (Determine what the problem requires you to do.)
3. What is the appropriate formula to be used? (Determine the formula to be used.)
4. What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
5. What is your final answer to the problem? (Determine the final answer of the
problem.)

Try to learn on how to solve problems involving compound interest, where compound interest
is computed more than once a year, from the succeeding examples.

Sample Problems:

Example 1:
Miss Jane Alvinia invested PhP 150 000.00 in a Cooperative that offers 3% interest
rate compounded semi-annually. How much interest will she earn if she will invest the
money for 2 years?

Follow the steps mentioned above to solve the problems:

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 150 000.00

i = 3% or 0.03
m =2
t = 2 years
n = 2(2) = 4
RO_General Mathematics_Grade 11_Q2_LP 2
3
Step 2: What is asked? (Determine what the problem requires you to do.)

How much interest will she earn if she will invest the money for 2 years? or
What is the compound interest?
Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

Ic = F - P
Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)

a. Solve for the future value F first, since the formula in finding the compound interest
requires the future value F and it was not given in the problem.
𝐢 𝐦𝐭
𝐅 = 𝐏 𝟏 +
𝐦
𝟎.𝟎𝟑 2(2)
= 150 000 ( 1+ ) substitute the given
𝟐

= 150 000 (1 + 0.015)4 simplify

= 150 000 (1.015)4 simplify
= 159 204.53 simplify
b. Find the compound interest Ic

Ic =F–P
= 159 204.53- 150 000.00
= 9 204.53
Step 5: What is your final answer to the problem? (Determine the final answer of the
problem.)

Therefore, Miss Jane Alvinia will earn an interest of PhP 9 204.53.

Example 2:
Miss Johanna borrowed PhP 40 000.00 at 7.5% compounded quarterly at a certain
cooperative. How much interest will be charge if she applies for a 3-year loan?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 40 000.00
i = 7.5% or 0.075
m=4
t = 3 years
n = 4(3)=12
Step 2: What is asked? (Determine what the problem requires you to do.)
How much interest will be charge if she applies for a 3-year loan? or
What is the compound interest?

RO_General Mathematics_Grade 11_Q2_LP 2

4
Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

Ic = F - P
Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)

a. Solve for the future value F first, since the formula in finding the compound interest
requires the future value F and it was not given in the problem.
𝐢 𝐦𝐭
𝐅= 𝐏 𝟏 +
𝐦
𝟎.𝟎𝟕𝟓
= 40 000(1 + 𝟒 )4(3) substitute the given

= 40 000 (1+ 0.01875)12 simplify

= 40 000 (1.01875)12 simplify
= 49 988.66 simplify
a. Find the compound interest Ic

Ic = F – P
= 49 988.66 – 40 000.00
= 9 988.66
Step 5: What is your final answer to the problem? (Determine the final answer of the
problem.)

Therefore, Miss Johanna shall pay an interest of PhP 9 988.66.

Example 3:
A teacher borrowed PhP 100 000.00 at 6% compounded monthly in a bank. How
much will she have to pay after 3 years?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 100 000.00

i = 6% or 0.06
m = 12
t = 3 years
n = 12(3) = 36
Step 2: What is asked? (Determine what the problem requires you to do.)

How much will she pay after 3 years? or What is the maturity/future value F?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

𝐢 𝐦𝐭
𝐅 = 𝐏 𝟏 + 𝐦

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
RO_General Mathematics_Grade 11_Q2_LP 2
5
 Substitute the given to the formula:
𝐢 𝐦𝐭
𝐅 = 𝐏 𝟏 + 𝐦
𝟎.𝟎𝟔 12(3)
= 100 000 (1 + 𝟏𝟐
)

= 100 000 (1 + 𝟎. 𝟎𝟎𝟓 )36

= 100 000 (1.005 )36
= 119, 668.05
Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, the teacher shall pay a total amount of PhP 119 688.05.

Example 4:
JV lends his friend PhP 400 000.00 at 4% compounded daily. How much did his
friend owe him after 4 years?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 400 000.00

i = 4% or 0.04
m = 365.25
t = 4 years
n = 365(4) = 1460
Step 2: What is asked? (Determine what the problem requires you to do.)

How much did his friend owe him after 4 years? or What is the maturity/future
value F?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)
𝐢 𝐦𝐭
𝐅 = 𝐏 𝟏 + 𝐦

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
Substitute the given to the formula:
𝐢 𝐦𝐭
𝐅 = 𝐏 𝟏 + 𝐦
𝟎.𝟎𝟒 365(4)
= 400 000 (1 + 𝟑𝟔𝟓
)

= 400 000 (1 + 𝟎. 𝟎𝟎𝟎𝟏𝟎𝟗𝟓𝟖𝟗 )1460

= 400 000 (1.000109589 )1460
= 469 400.23
Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, JV’s friend owe him PhP 469 400.23.

RO_General Mathematics_Grade 11_Q2_LP 2

6
 Example 5:
A businessman aims to have his savings grow to Php 1 000 000.00 in 5 years. How
much should be his initial deposit in an account that pays 6% interest rate compounded
monthly?
Step 1: What is/are given? (Identify the given data in the problem.)

F = PhP 1 000 000.00

i = 6% of 0.06
m = 12
t = 5 years
n = 12(5) = 60

Step 2: What is asked? (Determine what the problem requires you to do.)

How much should be his initial deposit in an account that pays 6% interest
rate compounded monthly? or What is the present value P?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

𝐅 𝐅
P= 𝑖 mt or P= 𝑖 n
𝟏+ 𝟏+
𝑚 𝑚

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
Substitute the given to the formula:
𝐅
P= 𝑖 mt
𝟏+
𝑚
𝟏 𝟎𝟎𝟎 𝟎𝟎𝟎
P= 0.06 12(5)
𝟏+
12

𝟏 𝟎𝟎𝟎 𝟎𝟎𝟎
= (𝟏+ 60
0.005)
𝟏 𝟎𝟎𝟎 𝟎𝟎𝟎
= (𝟏.𝟎𝟎𝟓)
60

= 741 372.20
Step 5: What is your final answer to the problem? (Determine the final answer of the
problem.)

Therefore, the businessman should have an initial deposit of PhP 741 372.20

Example 6:
How much do you need to invest today if you plan to accumulate a total amount of
PhP 200,000.00 on a savings account with 2.5% interest rate compounded semi-annually
for 10 years?

RO_General Mathematics_Grade 11_Q2_LP 2

7
Step 1: What is/are given? (Identify the given data in the problem.)

F = PhP 200 000.00

i = 2.5% or 0.025
m = 2
t = 10 years
n = 2(10) = 20

Step 2: What is asked? (Determine what the problem requires you to do.)

What is the principal amount or present value P?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

𝐅 𝐅
P= 𝑖 mt or P= 𝑖 n
𝟏+ 𝟏+
𝑚 𝑚

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
Substitute the given to the formula:
𝐅
P= 𝑖 mt
𝟏+
𝑚
𝟐𝟎𝟎 𝟎𝟎𝟎
P= 0.025 2(10)
𝟏+
2

𝟐𝟎𝟎 𝟎𝟎𝟎
= 20
(𝟏+ 0.0125)

𝟐𝟎𝟎 𝟎𝟎𝟎
= (𝟏.𝟎𝟏𝟐𝟓)20

= 156 001.71

Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, you need to invest PhP 156 001.71.

Example 7:
Alisha invested PhP 60 000.00 in a bank savings account at 4% compound
semiannually. How long should she let the investment stay if she wants to accumulate
Php 80 000.00?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 60 000.00
F = PhP 80 000.00
i = 4% or 0.04
m = 2
𝐢 𝟎.𝟎𝟒
j = 𝐦 = 𝟐 = 0.02

Step 2: What is asked? (Determine what the problem requires you to do.)

How long should she let the investment stay if she wants to accumulate
Php 80 000.00?

RO_General Mathematics_Grade 11_Q2_LP 2

8
Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)
𝐅
𝐥𝐨𝐠
𝐏
n=
𝐥𝐨𝐠 (𝟏+𝐣)

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
a. Substitute the given to the formula:
𝐅
𝐥𝐨𝐠
𝐏
n =
𝐥𝐨𝐠 (𝟏+𝐣)
𝟖𝟎 𝟎𝟎𝟎
𝐥𝐨𝐠
𝟔𝟎 𝟎𝟎𝟎
=
𝐥𝐨𝐠 (𝟏+𝟎.𝟎𝟐)
𝟒
𝐥𝐨𝐠
𝟑
=
𝐥𝐨𝐠 (𝟏.𝟎𝟐)
= 14.53
Since interest is earned only at the end of the period,
Then, n = 15 periods or 15 semi annuals.
𝒏
b. Since n = mt, then t = 𝒎
Substitute the value,
𝟏𝟓
t=
𝟐
t = 7.5 years

Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, it will take 7.5 years to accumulate PHP 80 000.00.

Example 8:
Jannia’s PhP 100 000.00 investment in a bank earned PhP 30 000.00 at 6%
compounded quarterly. How long did she invest the money?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 100 000.00

F = PhP 100 000.00 + PhP 30 000.00 = PhP 130 000.00
i = 6% or 0.06
m = 4
𝒊 𝟎.𝟎𝟔
j = 𝒎 = 𝟒 = 0.015

Step 2: What is asked? (Determine what the problem requires you to do.)

How long did she invest the money?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

𝐅
𝐥𝐨𝐠
𝐏
n= by definition 4
𝐥𝐨𝐠 (𝟏+𝐣)

RO_General Mathematics_Grade 11_Q2_LP 2

9
Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)

a. Substitute the given to the formula:

𝐅
𝐥𝐨𝐠
𝐏
n =
𝐥𝐨𝐠 (𝟏+𝐣)
𝟏𝟑𝟎 𝟎𝟎𝟎
𝐥𝐨𝐠
𝟏𝟎𝟎 𝟎𝟎𝟎
=
𝐥𝐨𝐠 (𝟏+𝟎.𝟎𝟏𝟓)
𝟏𝟑
𝐥𝐨𝐠
𝟏𝟎
=
𝐥𝐨𝐠 (𝟏.𝟎𝟏𝟓)
= 17.62
Since interest is earned only at the end of the period, then, n = 18 periods or 18
quarters.
𝒏
b. Since n = mt, then t = 𝒎
Substitute the value,
𝟏𝟖
t= 𝟒
t = 4.5 years

Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)
Therefore, Jannia invested her money for 4.5 years.

Example 9:
An investment of PhP 20 000.00 had accumulated to PhP 30 000 in 5 years.
At what nominal rate compounded semi-annually has been applied for the investment?

Step 1: What is/are given? (Identify the given data in the problem.)

P = PhP 20 000.00
F = PhP 30 000.00
t = 5 years
m = 2
n = mt = 2(5) =10

Step 2: What is asked? (Determine what the problem requires you to do.)

At what nominal rate (i) compounded semi-annually has been applied for the
investment?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)
𝐧 𝐅
i = mj and j= − 𝟏
𝐏

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
a. To find the nominal rate (i), you must find periodic rate (j) first:
𝟏𝟎 𝐅
j= 𝐏
− 𝟏
𝟏𝟎 𝟑𝟎 𝟎𝟎𝟎
= 𝟐𝟎 𝟎𝟎𝟎
− 𝟏

RO_General Mathematics_Grade 11_Q2_LP 2

10
 𝟏𝟎 𝟑
= 𝟐
− 𝟏
= 0.0414
b. Since i = mj, then
i = 2 (0.0414)
= 0.0828
= 8.28%

Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, the investment had been invested at 8.28% compounded semi-annually.

Example 10:
Janine has invested PhP 50 000.00 in a savings bank. At what interest rate
compounded quarterly will make her money double itself in 10 years?

Step 1: What is/are given? (Identify the given data in the problem.)
P = PhP 50 000.00
F = 2 (50 000.00 ) = 100 000.00 since the money is doubled
t = 10 years
m = 4
n = mt = 4(10) = 40

Step 2: What is asked? (Determine what the problem requires you to do.)

At what interest rate compounded quarterly will make her money double itself
in 10 years?

Step 3: What is the appropriate formula to be used? (Determine the formula to be used.)

𝐧 𝐅
i = mj and j= − 𝟏
𝐏

Step 4: What is/are the solution/s to the problem? (Determine the solution/s of the given
problem.)
a. To find the nominal rate (i), you must find periodic rate (j) first:
𝟏𝟎 𝐅
j= 𝐏
− 𝟏
𝟒𝟎 𝟏𝟎𝟎 𝟎𝟎𝟎
= − 𝟏
𝟓𝟎 𝟎𝟎𝟎
𝟒𝟎
= √𝟐 − 𝟏
= 1.01745 - 1
= 0.01748
b. Since i = mj, then

i = 4 (0.01748)
= 0.0699
= 6.99%

RO_General Mathematics_Grade 11_Q2_LP 2

11
Step 5: What is your final answer to the problem? (Determine the final answer of the problem.)

Therefore, in 10 years, Janine’s investment will double at 6.99% interest rate

compounded quarterly.

Let us test your understanding!

ACTIVITY 1:

Solve the following problems. Write your answer on your paper.

1. What is the maturity value of PhP 300,000.00 investment at 5% interest compounded
semi-annually in 4 years?

2. You borrow PhP150,000.00 from someone and promise to pay an interest of 5%

compounded monthly. How much will you pay at the end of 3 years?

3. How long will it take PhP 5 000.0 to earn PhP 1 000.00 if the interest is 8% compounded
quarterly?

4. At what nominal rate compounded monthly will PhP 35 000.00 accumulate

PhP 70 000.00 in 5 years?

5. How much will you invest if you want to accumulate PhP 100 000.00 at 7.5% interest
compounded semi-annually for 6 years.

ACTIVITY 2:
______________
_
Solve the following problems. Show your complete solutions.
For items 1 – 2:

Your father invested his PhP 25,000 in a bank for 3 years

at 2% compounded quarterly.

1. What is the maturity value?

2. What is the interest?

RO_General Mathematics_Grade 11_Q2_LP 2

12
 3. How much should you invest in a fund earning 6% compounded monthly if you need
PhP 75,000 in 1 year and 3 months?

4. How long will it take the PhP 200 000.00 loan to accumulate to PhP 300 000.00 at 7.5%
compounded semi-annually?

ACTIVITY 3:
_______
Solve___________
the following problems. Show your complete solutions.

1. A salesman borrowed PhP 200 000.00 for his capital in his buy and sell business. If
the loan is at 5% interest compounded semi-annually, how much will he pay after 3
years?

2. At what interest rate quarterly will an investment double itself after 8 years?

3. How long would your PhP 50 000.00 investment be tripled if you invest it at 6% interest
rate compounded monthly?

- End of Activity Tasks -

IV. Rubric for Scoring

Activity 1 Activity 2 Activity 3

Using the given Steps on Solving Problems Involving Compound Interest:

5 points – for complete solutions(the 5 steps were used and all the entries were correct)
4 points – 4 steps with correct entries were used
3 points – 3 steps with correct entries were used
2 points – 2 steps with correct entries were used
1 point – only 1 step with correct entry was used

V. Reflection

Write a short reflection relating the statement, “As the

frequency of conversion periods in a year increases,
the larger the compound interest, and so, is the
compound amount.” in real life.

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

RO_General Mathematics_Grade 11_Q2_LP 2

13
VI. Answer Key

Activity 1:
1. F = PhP 365 520.87
2. I = PhP 24 220.83
3. n =10 quarters or t = 2 ½ years
4. i = 13.94%
5. P = PhP 64 289.90

Activity 2:
1. F = PhP 26 541.95
2. I = PhP 1 541.95
3. P = PhP 69 593.77
4. n = 12 semi-annuals or t = 6 years

Activity 3:
1. F = PhP 231 938.68
2. i = 8.76%
3. n = 221 months or t = 18 years and 5 months

VII. References

Bacani, J.B. and Soriano, J.M., (2017) General Mathematics for Grade 11, 151 Quezon City:
Ephisians Publishing Inc.
DepEd (2016). General Mathematics Learners Material First Edition. Department of
Education.
Oronce, O.A. (2016). RBS General Mathematics First Edition, Sampaloc, Manila: Rex
Book Store, Inc.
Reyes A., and Sulit, R. (2016), General Mathematics, Jimcyville Publications

DEVELOPMENT TEAM OF THE LEARNER’S PACKET

Writer : DOLORES SAPINOSO RULL – Rodriguez NHS

Reviewer : JOHN EMMANUEL R. IBE – Magarao NHS
Content Editor : JUMAR R. VELASCO – Ragay SMOHS
Lay-out Artist : JHOMAR B. JARAVATA- Bula NHS
Illustrator : DOLORES SAPINOSO RULL – Rodriguez NHS
Validator : ARABELLA B. MENDEZ – Baao NHS
Language Editor : AIZA B. SUMPAY – Rodriguez NHS

RO_General Mathematics_Grade 11_Q2_LP 2

14