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Compund-Interest

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17 views

Compund-Interest

Uploaded by

Kaeser0422
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Compound

Interest
C R I S P I N T. VA L I E N T E
Lesson Outline:
•Compute Maturity Value
•Compute Present Value
•Compounding more than once a year
•Maturity value interest, and present value when
compounding interest is computed more than
once a year
Illustration of compound Interest
Many bank savings accounts pay
compound interest. In this case, the
Compound interest is added to the account at
Interest regular intervals, and the sum
becomes the new basis for computing
interest just like what Table 2 in page
2 presented. This means that the
interest earned at a certain time
interval is automatically reinvested to
yield more interest.
Maturity (Future) Value and Compound Interest
Seven years ago, Audrey put her savings worth ₱ 15 000 in
an account providing a compound interest rate of 3.5%
annually. Find the value of her savings today and the
amount of interest.
Find the maturity value and the compound interest if
P10, 000 is compounded annually at an interest rate
of 2% in 5 years.
Find: (a) maturity value
(b) compound interest

Answer: (a) P 11, 040.081


(b) P 1, 040.81
Find the maturity value and interest if P 50,000 is
invested at 5% compounded annually for 8 years.
Find: (a) maturity value
(b) compound interest

Answer: (a) P 73, 872.77


(b) P 23, 872.77
At what interest rate, compounded annually,
must ₱ 10 000 be invested in order to earn an
interest worth ₱2 000 in 5 years?
Present Value P at Compound Interest
How much money should a student place in a time
deposit in a bank that pays 1.5% compounded
annually so that he will have ₱ 200 000 after 6 years?
What is the present value of P50, 000 due in 7 years
if money is worth 10% compounded annually?
Find: P

Answer:
The present value is P25,657.91
1st 10 worth 3 points
How much money should a student place in a time
deposit in a bank that pays 1.1% compounded annually
so that he will have P200,00 after 6 years?
Answer:
P187,293.65
Compounding More than Once a Year
Interest can be compounded more frequent than once a year. For instance,
interest can be compounded semi-annually. In this case, there are two
compounding periods in a year. Other common compounding periods are four
times in a year (or quarterly) and 12 times in a year (or monthly).
To have a capital for a small food business, Mang Juan
borrowed ₱ 15 000 at 5% interest rate compounded quarterly.
How much does Mang Juan need to pay after 2 years?
Dean borrows ₱ 100 000 and promises to pay the
principal and interest at 12% compounded monthly.
How much must he repay after 10 years?
Find the maturity value and interest if
P10,000 is deposited in a bank at 2%
compounded quarterly for 5 years.
Find: (a) F
(b) Ic

Answer: (a) P11,048.96


(b) P1,048.96
Cris barrows P50,000 and promises to pay
the principal and interest at 12%
compounded monthly. How much he repay
after 6 years?

Answer: P102,354.97c
Find the present value of ₱ 60 000 due in 5 years
if money is invested at 5% compounded semi-
annually.
Find the present value of P50,000 due in
4 years if money is invested at 12%
compounded semi-annually.

Answer: P31,370.62
1st 10 worth 3 points
What is the present value of ₱ 35 000 due in 3 years and
6 months if money is worth 5% compounded quarterly?
1st 10 worth 3 points
What is the present value of P25,000 due in 2 years and
6 months if the money is worth 10% compounded
quarterly

Answer:
P19,529.96

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