CHAPTER IV

STATISTICS (DATA MANAGEMENT)

TOPICS
1. Frequency Distribution Table
2. Measures of Central Tendency
3. Measures of Dispersion
4. Measures of Relative Position
5. Measures of Correlations

LEARNING OUTCOMES
At the end of the chapter, you should be able to:
 Use variety of statistical tools to process and manage numerical data.
 Use the methods of linear regression and correlation to predict the
value of a variable given certain conditions.
 Advocate the use of statistical data in making important decisions.

Introduction to Data Management

When data are collected, it needs to be organized in a fashion that will allow the
researcher to do analysis easily and correctly interpret the results. The array and the
frequency distribution table are two ways of helping us to characterize the data. The
frequency distribution table classifies the observed values into groups and the number
of items falling into each group is stated. Sometimes the user of statistics will find
frequency distributions already constructed in the publications to which he may refer;
sometimes he will construct his own frequency distribution by first considering the
appearance of the raw or unclassified data.

Raw data or unclassified data is the set of data in its original form. It has not
been organized in any manner and is recorded in the order observed.
Example: Days - to – maturity for 40 short- term investments
 70 64 99 55 64 89 87 65
62 38 67 70 60 69 78 39
75 36 71 51 99 68 95 86
57 53 47 50 55 81 80 89
51 36 63 66 85 79 83 70

The arrangement of the days- to-maturity for 40 short term investments is

random and we have omitted the names of the bank clients in order to save space.

Array is the arrangement of the observed values according to magnitude. It may

be in ascending or descending order.

Example: The table below shows an illustration of an array or sorted data. Data are
arranged in ascending order.

Suppose below is the Sorted Data (Array) of Population by Province in Region IV-
B MIMAROPA

Province Population (2015)

Marinduque 235,000
Romblon 293,000
Occidental Mindoro 487,000
Oriental Mindoro 844,000
Palawan 1,104,000

Frequency distribution table is a summarized table wherein the classes are

either distinct values or intervals with a frequency count.

The frequency distribution table can be in the form of single value grouping or
grouping by class interval. Single value grouping is a frequency of observed values
wherein classes are distinct values. The range of values is short and with unique values
occurring more than once. Grouping by class intervals is a frequency count of observed
values wherein the classes are intervals.

Example: To illustrate single value grouping, suppose we have data on the number of
children of 50 married students taking Bachelor of Science in Developmental
Communication.

0 0 1 2 2 2 3 3 4 4
0 0 1 2 2 3 3 3 4 4
0 1 1 2 2 3 3 3 4 4
0 1 1 2 2 3 3 3 4 5
0 1 1 2 2 3 3 3 4 5
 Suppose below is Single Value Grouping of Number of Children of Married
Students taking BS in Developmental Communication

Number of Children No. of Married Students %

0 7 14
1 8 16
2 11 22
3 14 28
4 8 16
5 2 4
Total 50 100

There are many ways to manage data. There are also other ways to a clearer, a
more elaborate, and more complex Frequency Distribution Table. From the raw data
that is not grouped yet, we arrange them in ascending or descending order to form an
array or we can create a table to make them easier to interpret or make use as basis for
decision making.

Topic 1: Frequency Distribution Table

Suppose we were the scores of 50 CAST students in their Final Exam for the
subject Mathematics in the Modern World.

87 83 71 79 83 76 83 91 66 90
76 100 87 83 94 85 75 79 77 83
98 80 88 78 80 88 83 86 68 90
89 95 86 81 84 73 74 78 92 82
93 83 75 77 82 89 83 84 72 91

Our task now is to create a Frequency Distribution Table with Column heads for
Class Limit, Class Boundary, Tally, Frequency, Cumulative Frequencies (> and <), and
lastly the Class Mark (X). Making a Frequency Distribution Table as detailed as this one
will make it very useful if we wish to do or utilize the other statistical tools for grouped
data. See below how our Frequency Distribution Table will look like:

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)

N = _______
 Before we proceed with the actual filling out or answering of the frequency
distribution table, we should follow some helpful steps.

Step 1 - Know your Population (denoted by N) or your Sample (denoted by n).

Population refers to the totality of the respondents or subjects while a sample is just a
part or a representative or an entity taken from a population. In our case, it was not
mentioned that the 50 students were part of a bigger group. Thus, we can assume that
it is our Population which is 50. N = 50.

NOTE: Before you proceed with Step 2, you can actually arrange the scores in
ascending or descending order to make an array.

Step 2 - Determine the Highest Score (HS). In our given set of data, HS = 100.

Step 3 - Determine the Lowest Score (HS). In our given set of data, LS = 66.

Step 4 - Compute the Range (R). Range = Highest Score (HS) minus Lowest Score (LS).
R = 100 - 66. R = 34.

Step 5 - Use the Sturge’s Formula (K) = 1 + 3.3 log N, where N is our Population. If the
given is the sample size, we just change N to n.

In our given data, our population is 50. Thus,

K = 1 + 3.3 log N
K = 1 + 3.3 log (50)
K = 1 + 3.3 (1.69897000434)
K = 1 + 5.60660101432
K = 6.60660101432 or K = 6.6066 or K ≈ 7 (approximately 7 classes)

Later we can also just use the 6.6066 (up to four decimal places). By therules of
rounding numbers, it is estimated to be 7, this means our table will most likely have 7
classes. Thus, we can prepare 7 rows (below the heads of the table).

Step 6 - Compute the Class Width (C). Class Width (C) = R ÷ K.

C = R ÷ K.
C = 34 ÷ 6.6066
C = 5.14636878273
or
C=5

NOTE: Class Width should always be rounded off to the nearest whole number.

Step 7 - Start Filling out the Frequency Distribution Table.

FILLING OUT OR ANSWERING THE FREQUENCY DISTRIBUTION TABLE
CLASS LIMIT
This column can be in ascending or descending order. But, most of the time statisticians
practice to start with the Lowest Score, thus, ascending order. In the table below, we started
with the Lowest Score which is 66. The Lower Class Limit (LCL) of the first class is 66 and by
using the Class Width which is 5, we can count off up to five numbers from 66…. So - 66, 67, 68,
69, 70. From here, we can determine the Upper Class Limit (UCL) of the same row - 70. On the
second class, we can start at 71 since the UCL of the first class is 70. Then we repeat the process
by counting five numbers from 71…. So - 71, 72, 73, 74, 75. Thus, we now determined that the
UCL of the second class is 75. We repeat this process until we reach the last class of this
column.
The last class is identified if we already covered or reached the Highest Score of our
given set of data. In this case, we stop at the 7 th Class (which we already predicted using the
Sturge’s Formula in Step 5) since the class interval 96 - 100 reached and covered the Highest
Score - 100.

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70
71 - 75
76 - 80
81 - 85
86 - 90
91 - 95
96 - 100
N = _______

CLASS BOUNDARY
Separate one class in a grouped frequency distribution from another. The boundaries
have one more decimal place than the raw data and therefore do not appear in the data. There
is no gap between the upper boundary of one class and the lower boundary of the next class.
The lower class boundary is found by subtracting 0.5 units from the lower class limit and the
upper class boundary is found by adding 0.5 units to the upper class limit.
Class Limit Class Boundary Frequency Class Mark
Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5
71 - 75 70.5 - 75.5
76 - 80 75.5 - 80.5
81 - 85 80.5 - 85.5
86 - 90 85.5 - 90.5
91 - 95 90.5 - 95.5
96 - 100 95.5 - 100.5
N = _______
TALLY
In tallying scores, we must be very careful and we must do it one by one. We
must use our raw data as reference. It would be easier if the scores were arranged
beforehand in ascending or descending order. We will tally the number of scores that
fall within each class.

87 83 71 79 83 76 83 91 66 90
76 100 87 83 94 85 75 79 77 83
98 80 88 78 80 88 83 86 68 90
89 95 86 81 84 73 74 78 92 82
93 83 75 77 82 89 83 84 72 91

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5 II
71 - 75 70.5 - 75.5 IIII - I
76 - 80 75.5 - 80.5 IIII - IIII
81 - 85 80.5 - 85.5 IIII - IIII - IIII
86 - 90 85.5 - 90.5 IIII - IIII
91 - 95 90.5 - 95.5 IIII - I
96 - 100 95.5 - 100.5 II
N = _______

FREQUENCY (f)
We simply convert the tally in to Hindi-Arabic Numbers. N should be equal to
the Population - if not - try rechecking you tallies.

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5 II 2
71 - 75 70.5 - 75.5 IIII - I 6
76 - 80 75.5 - 80.5 IIII - IIII 10
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14
86 - 90 85.5 - 90.5 IIII - IIII 10
91 - 95 90.5 - 95.5 IIII - I 6
96 - 100 95.5 - 100.5 II 2
N = 50
CUMMULATIVE FREQUENCY
Cumulative frequency is used to determine the number of observations that lie
above (or below) a particular value in a data set. The cumulative frequency is calculated
using a frequency distribution table, which can be constructed from stem and leaf plots
or directly from the data. For “ < cf ” - we start by copying the frequency of the first
class (66 - 70) which is 2. To answer what is below it, we must add frequency of the
next class to it. The process is repeated until the last class is reached.
Class Limit Class Boundary Frequency Class Mark
Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5 II 2 2
71 - 75 70.5 - 75.5 IIII - I 6 8
76 - 80 75.5 - 80.5 IIII - IIII 10 18
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32
86 - 90 85.5 - 90.5 IIII - IIII 10 42
91 - 95 90.5 - 95.5 IIII - I 6 48
96 - 100 95.5 - 100.5 II 2 50
N = 50
For “ > cf ” - we start by copying the frequency of the last class (96 - 100) which
is 2. To answer what is above it, we must add frequency of the next class to it. The
process is repeated until the first class is reached.
Class Limit Class Boundary Frequency Class Mark
Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5 II 2 2 50
71 - 75 70.5 - 75.5 IIII - I 6 8 48
76 - 80 75.5 - 80.5 IIII - IIII 10 18 42
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32 32
86 - 90 85.5 - 90.5 IIII - IIII 10 42 18
91 - 95 90.5 - 95.5 IIII - I 6 48 8
96 - 100 95.5 - 100.5 II 2 50 2
N = 50

CLASS MARK (X)

The Class Mark is simply the midpoint or the middle score or the median of
every class limit. For instance, the class mark of 66 - 70 (66, 67, 68, 69, 70) is 68.
Class Limit Class Boundary Frequency Class Mark
Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)
66 - 70 65.5 - 70.5 II 2 2 50 68
71 - 75 70.5 - 75.5 IIII - I 6 8 48 73
76 - 80 75.5 - 80.5 IIII - IIII 10 18 42 78
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32 32 83
86 - 90 85.5 - 90.5 IIII - IIII 10 42 18 88
91 - 95 90.5 - 95.5 IIII - I 6 48 8 93
96 - 100 95.5 - 100.5 II 2 50 2 98
N = 50
Topic 2: Measures of Central Tendency

An average is regarded as the most representative value of a given data. The

concentration of data values is viewed as greatest at the average. An average is also
called a measure of central tendency since the average tends to lie centrally in an array
of values. There are three most commonly used averages: the mean, the median and
the mode.
Among the three averages mentioned earlier, the most widely used central
measure of a distribution is the (arithmetic) mean.

The mean of a data set is the sum of the data values

divided by the number of data values.

The mean represents the “center of gravity.” That is, if the values in a list were
to be put on a dot scale, the mean acts as the balancing point where smaller
observations will “balance” the larger ones. A basic feature of the average or mean is
the ease in its calculation. All we need to do is add up all the values and divide their
sum by the number of values. Furthermore, all the data contribute equally in its
calculation. That is, the “weight” of each of the data items in the list is the reciprocal of
the number n of data, i.e. 1/n.
Using the mean has its disadvangages. Extreme Scores distorts the mean. Plus, it
is tedious to compute by hand.
The data given in below lists selected socio-economic data of 15 countries as of
2017.
Socio-economic characteristics of 15 countries. January 2017.
Country Calorie Intake Life expectancy
Japan 2956 80
Australia 3216 78
Canada 3482 78
Hong Kong 3144 78
Italy 3504 78
Switzerland 3562 78
France 3465 77
U.S.A 3671 77
Great Britain (U.K.) 3149 76
Germany 3522 76
New Zealand 3362 76
Singapore 3198 76
Brunei 2837 75
Taiwan 3036 75
Macau 2162 73
Total
 The mean or average calorie intake (per day) among the 15 countries is:
2956 + 3216 + … + 3036 + 2162
15

= 48266/15 = 3217.733 calories per day per country

Providing “equal weights” to the data in computing the mean may present
problems, particularly when some of the data are extreme, either extremely high or
extreme low. In such instances, the mean presents a distorted representation of the
average. For example, the mean of income data may not truly represent the center as
income data have a few extremely high values.

An average is a value that is intended to be in some sense typical of a whole

distribution. As was earlier pointed out, in some cases, the mean may not be a good
measure of the center. One alternative average is the median, the cut off where the
data are split evenly into lows and highs.
The median of a data set is the “middle observation” when the data set is sorted (in
either increasing or decreasing order). Note that when the size n is even, the median is the
average of the two middle scores.

In order to calculate the median, it is essential to firstly list the data into an
ordered or sorted array of numbers. The ordering or sorting may be a listing of the data
in either increasing or decreasing order. If there are no ties, half the observations will
be smaller than the median and the other half will be larger.

For this array: 1, 2, 2, 2, 3, the median (2) is less than or equal to half and
greater than or equal to the other half.

 x N 1 , if N is odd
 2

Md   x N  x N
1
 2 2
, if N is even
 2

Just as in the case of the sample mean and the population mean, there is no
difference in the calculations for arriving at the sample median and population median.
The difference between a population median and a sample median is conceptual. When
the data pertain to a sample, the median is called the sample median, while if the data
pertain to an entire population, then the median calculated is the population median.
The sample median is denoted as ~ x and is computed in the same fashion as the
~
population median (denoted as  ), that is, we sort the data and find the middle value
(or average of the two middlemost items) in the ordered list. The sample median may
be viewed as an estimate of the population median.
Let’s try again!

This time we will use the data set that was given for the previous lesson. We will
try to find the measures of central tendency: mean, median, and mode with the
ungrouped and grouped data.
Mean of Ungrouped Data
87 83 71 79 83 76 83 91 66 90
76 100 87 83 94 85 75 79 77 83
98 80 88 78 80 88 83 86 68 90
89 95 86 81 84 73 74 78 92 82
93 83 75 77 82 89 83 84 72 91

We use the formula given:

mu’ for opulation ean and -bar’ for Sample ean )
=Σx/N
= (x1 + x2 + x3 + … + n) / N
= 87 + 76 + 98 + … + 91) / 50
= 4150 / 50
= 83

Mean of Grouped Data

Class Class
Class Limit Frequency
Boundary Tally < cf > cf Mark fX
LCL– UCL (f)
LCB – UCB (X)
66 - 70 65.5 - 70.5 II 2 2 50 68 136
71 - 75 70.5 - 75.5 IIII - I 6 8 48 73 438
76 - 80 75.5 - 80.5 IIII - IIII 10 18 42 78 780
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32 32 83 1162
86 - 90 85.5 - 90.5 IIII - IIII 10 42 18 88 880
91 - 95 90.5 - 95.5 IIII - I 6 48 8 93 558
96 - 100 95.5 - 100.5 II 2 50 2 98 196
N = 50 Σ fX = 4150
We use the formula given:
mu’ for opulation ean and -bar’ for Sample ean )
= Σ fX / N
= 4150 / 50
= 83
Median of Ungrouped Data

87 83 71 79 83 76 83 91 66 90
76 100 87 83 94 85 75 79 77 83
98 80 88 78 80 88 83 86 68 90
89 95 86 81 84 73 74 78 92 82
93 83 75 77 82 89 83 84 72 91

First, we must arrange the scores in ascending or descending order. Then, simply
look for the middle score. If the population is even, we will have two scores in the
middle. in that case we will have to add the two middle scores and then divide the sum
by two. The result of that will be the Median ( or -tilde).
The scores are arranged in ascending order as the arrow shows.
66 74 77 79 82 83 84 87 90 93
68 75 77 80 83 83 85 88 90 94
71 75 78 80 83 83 86 88 91 95
72 76 78 81 83 83 86 89 91 98
73 76 79 82 83 84 87 89 92 100

In our given set of data, we found 83 and 83 in the middle. From there, it is
already obvious that our median is 83.

Median of Grouped Data

Class Class
Class Limit Frequency
Boundary Tally < cf > cf Mark
LCL– UCL (f)
LCB – UCB (X)
66 - 70 65.5 - 70.5 II 2 2 50 68
71 - 75 70.5 - 75.5 IIII - I 6 8 48 73
76 - 80 75.5 - 80.5 IIII - IIII 10 18 42 78 Cfp
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32 32 83 Median Class
86 - 90 85.5 - 90.5 IIII - IIII 10 42 18 88
91 - 95 90.5 - 95.5 IIII - I 6 48 8 93
96 - 100 95.5 - 100.5 II 2 50 2 98
N = 50

We use the formula given:

= b+C 2) - Cfp] / f md}

Where:

= median
Lb = lower boundary of the median class
Median class is the first class interval where N/2 is covered in <cf.
Cfp = the less than cumulative frequency of the class interval preceding the
median class
C = size of the median class
f md = frequency of the median class
N = Population

Thus…
N / 2 = 50 / 2 = 25 (meaning the 4th class is the median class)

= b+C 2) - Cfp] / f md}

= 80.5 + 5 25) - 18] / 14}
= 80.5 + 5 7] / 14}
= 80.5 + 5 0.5}
= 80.5 + 2.5

Mode of Ungrouped Data

The Mode is simply the score or scores that occurs or occur the most.

87 83 71 79 83 76 83 91 66 90
76 100 87 83 94 85 75 79 77 83
98 80 88 78 80 88 83 86 68 90
89 95 86 81 84 73 74 78 92 82
93 83 75 77 82 89 83 84 72 91

In this case we only have one mode (which is obviously 83) and it means the
given set of data is unimodal. If it happened that there are two modes then it is
bimodal; trimodal if there are three modes; and polymodal if the are four or more
modes. There are also cases in which the is No Mode at all or none of the scores
appeared or occurred more than once.
Suppose we have an array: 1, 2, 2, 3, 3, 3, 4, 4, 5. Although, 2 and 4 were also
repeated, still, the score 3’ has the highest frequency. So, the mode is 3’ and it is
unimodal.
Mode of Grouped Data

Class Class
Class Limit Frequency
Boundary Tally < cf > cf Mark
LCL– UCL (f)
LCB – UCB (X)
66 - 70 65.5 - 70.5 II 2 2 50 68
71 - 75 70.5 - 75.5 IIII - I 6 8 48 73
76 - 80 75.5 - 80.5 IIII - IIII 10 18 42 78 d1 = 14 - 10 = 4
81 - 85 80.5 - 85.5 IIII - IIII - IIII 14 32 32 83 Modal Class
86 - 90 85.5 - 90.5 IIII - IIII 10 42 18 88 d2 = 14 - 10 = 4
91 - 95 90.5 - 95.5 IIII - I 6 48 8 93
96 - 100 95.5 - 100.5 II 2 50 2 98
N = 50

We use the formula given:

Mode = Lb + C [ d1 / ( d1 + d2 ) ]

Where:

Lb = lower boundary of the modal class

Modal class is the class interval with the highest frequency

d1 = the difference between the frequency of the modal class and the
frequency of the class interval before or lower than the modal class

d2 = the difference between the frequency of the modal class and the
frequency of the class interval after or higher than the modal class

C = size of the modal class

Thus…
Mode = Lb + C [ d1 / ( d1 + d2 ) ]
Mode = 80.5 + 5 [ 4 / ( 4 + 4 ) ]
Mode = 80.5 + 5 [ 4 / ( 8 ) ]
Mode = 80.5 + 5 [0.5 ]
Mode = 80.5 + 2.5
Mode = 83
Topic 3: Measures of Dispersion

Descriptive measures that are used to indicate the amount of variation in data
set are called measures of variability, dispersion, or spread. When descriptive statistics
are presented, there is usually at least one measure of central tendency and at least
one measure of variability reported.

THE RANGE

The range of data set is defined to be the difference between the highest and
lowest value in data set.

Range = Highest Value - Lowest Value

Characteristics of the Range

It is easy to compute and understand. It emphasizes the extreme values.

However, it is the most unstable or unreliable measure because its value easily changes
or fluctuates with the change in the extreme values.

Some Uses of the Range

The range is used to report the movement of stock process over a period of the
time and the weather reports typically state the high and low temperature readings for
a 24 - hour period.

Example: Find the range in set A and B.

Set A: 80, 86, 87, 90, 95

Set B: 83, 84, 85, 90, 92

Solution: Set A: Range = Highest Value - Lowest Value

= 95 - 80
= 15

Set B: Range = Highest Value - Lowest Value

= 92 - 83
=9
Based on the compute range for sets A and B, it can be concluded that A has greater
variability as compared to B.
THE MEAN DEVIATION

The mean deviation measures the average deviation of the values from the
arithmetic mean. It gives equal weight to the deviation of every observation.

Mean Deviation for Ungrouped Data (For a Sample)

M.D. Σ |x - | / n

Where: M.D. = mean deviation

x = a particular data
= sample mean
n = total number of observations
|| = absolute value

Sample Problem:
Consider the hourly rate of the randomly selected employees in three different
business companies in San Jose, Occidental Mindoro.

Find the mean deviation of the data.

Company A: P190, 195, 200, 205, 210

Company B: P180, 190, 200, 210, 220
Company C: P160, 180, 200, 220, 240

Solution: Company A
x x- -
190 -10 10
195 -5 5
200 0 0
205 5 5
210 10 10
Σ x = 1000 Σ -

=Σx/n
= (x1 + x2 + x3 + … + n) / n
= (190 + 195 + 200 + 205 + 210) / 5
= 1000 / 5
= 200

.D. = Σ |x - | / n
M.D. = (10 + 5 + 0 + 5 + 10) / 5
M.D. = 30 / 5
M.D. = 6
 The mean deviation for these data of five items is 6. This would mean that on
the average, the values deviation from the mean values of 200 by 6.
Solution: Company B
x x- -
180 -20 20
190 -10 10
200 0 0
210 10 10
220 20 20
Σ x = 1000 Σ -
=Σx/n
= (x1 + x2 + x3 + … + n) / n
= (180 + 190 + 200 + 210 + 220) / 5
= 1000 / 5
= 200
.D. = Σ |x - | / n
M.D. = (20 + 10 + 0 + 10 + 20) / 5
M.D. = 60 / 5
M.D. = 12

Solution: Company C
x x- -
160 -40 40
180 -20 20
200 0 0
220 20 20
240 40 40
Σ x = 1000 Σ -
=Σx/n
= (x1 + x2 + x3 + … + n) / n
= (160 + 180 + 200 + 220 + 240) / 5
= 1000 / 5
= 200
.D. = Σ |x - | / n
M.D. = (40 + 20 + 0 + 20 + 40) / 5
M.D. = 120 / 5
M.D. = 24

Base on the compute mean deviation for companies A, B, and C, it can be

concluded that C has the greater variability as compared to A or B from the mean.
Mean Deviation for Grouped Data (For a Sample)

Formula:

M.D. Σ f|X - |
n

Where: M.D. = mean deviation

X = midpoint or class mark of a class
= mean of the sample observations
n = total number of sample observations
|| = absolute value

Let us use the grouped data of the scores of students in an exam that we
organized beforehand in the previous lessons and consider it as a sample (not a
population anymore). We knew already that its mean is 83.

Frequency Class Mark

Score X- |X - | f|X - |
(f) (X)
66 - 70 2 68 -15 15 30
71 - 75 6 73 -10 10 60
76 - 80 10 78 5 5 50
81 - 85 14 83 0 0 0
86 - 90 10 88 5 5 50
91 - 95 6 93 10 10 60
96 - 100 2 98 15 15 30
Total n = 50 Σ f|X - |= 280

.D. = Σ f - n
M.D. = (30+60+50+0+50+60+30) / 5
M.D. = 280 / 50
M.D. = 5.6

The mean deviation for these set of data is 5.6. This would mean that on the
average, the values deviation from the mean values of 83 by 5.6.
STANDARD DEVIATION AND VARIANCE

The variance of a population is equal to the sum of the squared deviations

about the mean divided by the number of scores. The standard deviation is equal to
the square root of the variance. They are used when the mean is the preferred measure
of central tendency. They show whether or not the scores are grouped closely around
the mean of the distribution. The symbols for sample and population variances are s 2
and σ2, respectively. Variance is frequently discussed by researcher as an indicator of
how much variability there is in an entire distribution of scores. The standard deviation
is used to determine how far the data are from the mean.
If the value are clustered tightly about their mean, the standard deviation is
small and if the value become more scattered about their mean, the standard deviation
for these sets is large.

Some Characteristics of the Standard Deviation

It is the most important and useful measure of dispersion. It is widely used in

research and is used in drawing inferences from samples to population. It cannot be
computed from an open-end distribution because of the absence of additional
information.

Computation of Variance and Standard Deviation for Ungrouped Data

Before we can compute the standard deviation, we must determine if our data
set represents a population or a sample. We must know this fact so that correct
formula can be used.
The formulas are similar, however, a denominator of n - 1 is used to compute
the sample standard deviation and denominator of N for population standard deviation.
Since the sample standard deviation is often used to estimate the value of an unknown
population standard deviation, the use of n - 1 produces better estimates.
The variance of a population (σ2) and population standard deviation (σ) for
ungrouped data can be computed from the formula:

Variance of a Population (Ungrouped Data)

σ2 = Σ - )2
N

Standard Deviation of a Population (Ungrouped Data)

σ= Σ - )2
N
Where σ2 = variance of a population
σ = population standard deviation
x = values observations in the population
= population mean
N = total number of observations in the population

The sample variance (s2) and sample standard deviation (s) for ungrouped data
can be computed from the formula.

Variance of a Sample (Ungrouped Data)

s2 = Σ - )2
n-1

Standard Deviation of a Sample (Ungrouped Data)

2
s= Σ - )
n-1

Where s2 = variance of a sample

s = sample standard deviation
x = values observations in the sample
= sample mean
n = total number of observations in the sample

For instance:
Let us use the data of Company B in our previous lesson in Mean Deviation. Since the
given data is a sample and the data were ungrouped, we will use the formula for sample
variance and sample standard deviation for ungrouped data.

x x- ( - )2
180 -20 400
190 -10 100
200 0 0
210 10 100
220 20 400
Σ x = 1000 Σ ( - )2 = 1000

Variance of a Sample (Ungrouped Data)

s2 = Σ 2 2
- ) / n - 1 → = 1000 / (5 - 1) → = 1000 / (4) → s = 250

Standard Deviation of a Sample (Ungrouped Data)

2
s= Σ - ) /n-1 → 1000 / (5 - 1) → 250 → s = 15.81
Variance and Standard Deviation for Grouped Data
Computing for the Variance and Standard Deviation from a frequency
distribution is somehow similar to the ungrouped data. The noticeable difference is the
presence of frequencies and class marks instead of individual scores.

Variance of a Population (Grouped Data)

σ2 = Σ f - )
2

Standard Deviation of a Population (Grouped Data)

σ= Σf - )2
N

Where σ2 = variance of a population

σ = population standard deviation
X = Class Mark
= population mean
f = frequency
N = total number of observations in the population

Variance of a Sample (Grouped Data)

s2 = Σ f - )
2

n-1

Standard Deviation of a Sample (Grouped Data)

2
s= Σf - )
n-1

Where s2 = variance of a sample

s = sample standard deviation
f = frequency
X = class mark
= sample mean
n = total number of observations in the sample
 Let us use again the grouped data of the scores of students in an exam that we
organized beforehand in the previous lessons and also consider it as a sample (not a
population anymore). We knew already that its mean is 83.

Frequency Class Mark

Score X- (X - )2 f (X - )2
(f) (X)
66 - 70 2 68 -15 225 450
71 - 75 6 73 -10 100 600
76 - 80 10 78 5 25 250
81 - 85 14 83 0 0 0
86 - 90 10 88 5 25 250
91 - 95 6 93 10 100 600
96 - 100 2 98 15 225 450
Total n = 50 Σ f|X - |= 2600

Variance of a Sample (Grouped Data)

s2 = Σ f 2 2
- ) / n - 1 → = 2600 / (50 - 1) → = 2600 / (49) → s = 53.06

Standard Deviation of a Sample (Grouped Data)

2
s= Σf - ) /n-1 → 2600 / (50 - 1) → 53.06122… → s = 7.28

With a variance of 53.06, the standard deviation is 7.28. The whole data set can
be can be interpreted that the scores of the students are between 104.84 and 61.16.
Topic 4: Measures of Relative Position

The Quantiles
The quantiles are a natural extension of the idea of median in that they are
values which divide a set of data into equal parts.
While the median (same position with Q2 or D5 or P50) divides the distribution
into two parts, the quantiles divide it into four, or ten, or one hundred equal parts. The
quantiles that divide the distribution into four equal parts are called quartiles. These
values are denoted by Q1, Q2, and Q3. Twenty-five percent fall below the first quartile
(Q1), 50% are below the second quartile (Q2), and 75% are less than the third quartile
(Q3). Those which divide the distribution into ten part are called deciles. The data set
has nine deciles which are denoted by D 1, D2, …,D9,. Those which divide the distribution
into 100 equal parts are called percentiles. A set of data has 99 percentiles which are
denoted by P1,P2…, 99.

Let us try this!

Suppose the scores below are the scores of students in an entrance exam. We
will try to know which scores are positioned in certain quartiles, deciles, and
percentiles.

78 99 56 71 79 32 13
11 67 4 83 43 46 9
95 55 17 54 64 27 21

First, we have to arrange the scores in ascending order (least to greatest) or

descending order (greatest to least), which ever you find necessary, like they are to be
ranked. Since they are scores in an exam, the higher the score means the higher
position or quantile it should be in. Data Managers tend to arrange the scores or data in
terms of magnitude or into an array. Perhaps, it is because the counting of positions
should always start with the Lowest Score or at the bottom position.

9, 11, 13, 17, 21, 27, 32, 43, 46, 54, 55, 56, 64, 67, 71, 78, 79, 83, 95, 99

Which of the scores is positioned at the First Quartile (Q1)?

We can use the formula:

Qn = (k)n + (1 - k)th
4 4

Q1 = (1/4) 21 + (1 - 1/4)th
Q1 = (21/4) + (4/4 - 1/4)th
Q1 = (21/4) + (3/4)th
Q1 = (24/4)th
 Q1 = 6th Score

9, 11, 13, 17, 21, 27, 32, 43, 46, 54, 55, 56, 64, 67, 71, 78, 79, 83, 95, 99
The answer is 7. Since the score ‘ 7’ is positioned at the st Quartile
(Q1), this also means that 25% of the entrance exam takers scored lower than
the student who got score ‘ 7’ and the remaining 75% got higher score than
‘ 7’.

Which of the scores is positioned at the Second Decile (D2)?

We can use the formula:

Dn = (k)n + (1 - k)th
10 10

D2 = (2/10)21 + (1 - 2/10)th
D2 = (42/10) + (10/10 - 2/10)th
D2 = (42/10) + (8/10)th
D2 = (50/10)th
D2 = 5th Score
9, 11, 13, 17, 21, 27, 32, 43, 46, 54, 55, 56, 64, 67, 71, 78, 79, 83, 95, 99

The answer is 21. Since the score ‘ ’ is positioned at the nd Decile

(D2), this also means that 20% of the entrance exam takers scored lower than
the student who got score ‘ ’ and the remaining % got higher score than
‘ ’.

Which of the scores is positioned at the 90th Percentile (P90)?

We can use the formula:

Pn = (k)n + (1 - k)th
100 100

P90 = (90/100)21 + (1 - 90/100)th

P90 = (1890/100) + (100/100 - 90/100)th
P90 = (1890/100) + (10/100)th
P90 = (1900/100)th
P90 = 19th Score

9, 11, 13, 17, 21, 27, 32, 43, 46, 54, 55, 56, 64, 67, 71, 78, 79, 83, 95, 99

The answer is . Since the score ‘ ’ is positioned at the 9 th Decile

(P90), this also means that 90% of the entrance exam takers scored lower than
the student who got score ‘ ’ and the remaining 10% got higher score than
‘ ’.
 Topic 5: Measures of Correlation
Correlation is a bivariate analysis that measures the strength of association
between two variables and the direction of the relationship. In terms of the strength of
relationship, the value of the correlation coefficient varies between +1 and -1. A value
of ± 1 indicates a perfect degree of association between the two variables. As the
correlation coefficient value goes towards 0, the relationship between the two variables
will be weaker. The direction of the relationship is indicated by the sign of the
coefficient; a + sign indicates a positive relationship and a – sign indicates a negative
relationship. Usually, in statistics, we measure four types of correlations: Pearson
correlation, Kendall rank correlation, Spearman correlation, and the Point-Biserial
correlation. In this topic, we will learn of the Pearson r Moment of Correlation.

Pearson r correlation is the most widely used correlation statistic to measure

the degree of the relationship between linearly related variables. For example, in the
stock market, if we want to measure how two stocks are related to each other,
Pearson r correlation is used to measure the degree of relationship between the two.
The point-biserial correlation is conducted with the Pearson correlation formula except
that one of the variables is dichotomous. The following formula is used to calculate the
Pearson r correlation:

rxy = Pearson r correlation coefficient between x and y

n = number of observations
xi = value of x (for ith observation)
yi = value of y (for ith observation)

Correlation Analysis

Degrees of correlation between two variables may be classified into five general
categories.

1) Perfect Positive Correlation

2) Some Positive Correlation
3) No Correlation at all
4) Some Negative Correlation
 5) Perfect Negative Correlation

Source: https://towardsdatascience.com/eveything-you-need-to-know-about-interpreting-correlations-2c485841c0b8

Interpretation of r

As guide to the interpretation of the correlation coefficient , specific ranges of r

correspond to various interpretations. Interpretation of the degree of correlation may
differ depending on the author or source. But for our lesson, we will use the table
below:

Value of r Interpretation

1.00 Perfectly Positive Correlation

0.80 - 0.99 Strongly Positive Correlation

0.50 - 0.79 Moderately Positive Correlation

0.20 - 0.49 Weakly Positive Correlation

0.01 - 0.19 Negligible Positive Correlation

0.00 No Correlation

-0.01 - -0.19 Negligible Negative Correlation

-0.20 - -0.49 Weakly Negative Correlation

-0.50 - -0.79 Moderately Negative Correlation

-0.80 - -0.99 Strongly Negative Correlation

-1.00 Perfectly Negative Correlation

Source: https://www.researchgate.net/figure/Meaning-of-Pearson-correlation-coefficient-value-r_tbl1_299402589
Let us try this!

The time spent of an employee spent at a company and the employees’ hourly
pay , y , for 5 employees are listed in the table below. Let us try to calculate and
interpret the correlation coefficient r. We will also try to include a plot in our
discussion. (Pearson r Moment of Correlation)

x y x2 y2 xy

5 25 25 625 125
3 20 9 400 60
4 21 16 441 84
10 35 100 1225 350
15 38 225 1444 570
2
Σ 7 Σy 9 Σ = 375 Σ y2 = 4135 Σ y 1189

We use this recommended formula:

r = [(n) (Σ y) - (Σ ) (Σ y) ] ÷ {[√[(n)(Σ 2) - (Σ )2] * [√[(n)(Σ y2) - (Σ y)2]}

r = [(5) (1189) - (37) (139) ] ÷ {√[(5)(375) - (37)2] * √[(5)(4135) - (139)2]}
r = [(5945) - (5143) ] ÷ {√[(1875) - (1369)] * √[(20675) - (19321)]}
r = [802 ] ÷ {√[506] * √[1354]}
r = [802 ] ÷ {[22.4944437584] [36.7967389859]}
r = [802 ] ÷ {827.722175611}
r = 0.96892414343
r ≈ 0.97

With a value of r = 0.97, it means that the two variables are having a Strongly
Positive correlation. It can be interpreted that the time spent of an employee spent at a
company has a strongly positive correlation with the employee’s hourly pay.
 Try it yourself!

I. FREQUENCY DISTRIBUTION TABLE

Given the sample scores of 50 OMSC - CAST students in a 100-item examination in their
mathematics subject, c onstruct a Frequency Distribution Table using the steps (as guide)
indicated in our previous lessons.

81 94 85 86 68 89 95 86 90 75
78 83 76 79 77 98 80 88 83 83
79 84 73 84 72 87 83 71 91 74
77 80 88 78 92 93 83 75 82 83
83 82 89 91 66 76 100 87 90 83

Step 1 - Determine the Sample Size (denoted by n).

Step 2 - Determine the Highest Score (HS).

Step 3 - Determine the Lowest Score (HS).

Step 4 - Compute the Range (R).

Step 5 - Use the Sturge’s Formula (K) = 1 + 3.3 log n.

Step 6 - Compute the Class Width (C).

NOTE: Class Width should always be rounded off to the nearest whole number.
Step 7 - Start Filling our or answering the Frequency Distribution Table.

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)

N = _______

II. MEASURES OF CENTRAL TENDENCY

A. Ungrouped Data (Show complete solution.)
Given the sample scores of 50 OMSC - CAST students in a 100-item examination in their
mathematics subject.

81 94 85 86 68 89 95 86 90 75
78 83 76 79 77 98 80 88 83 83
79 84 73 84 72 87 83 71 91 74
77 80 88 78 92 93 83 75 82 83
83 82 89 91 66 76 100 87 90 83

1. Determine/Compute for the Mean of the ungrouped data above.

2. Determine/Compute for the Median of the ungrouped data above.
3. Determine/Compute for the Mode of the ungrouped data above.
B. Grouped Data (Show complete solution.)
Using the Frequency Distribution Table you created in Page 78,

Class Limit Class Boundary Frequency Class Mark

Tally < cf > cf
LCL– UCL LCB – UCB (f) (X)

N = _______

1. Determine/Compute for the Mean of the grouped data.

2. Determine/Compute for the Median of the grouped data.
3. Determine/Compute for the Mode of the grouped data.
III. MEASURES OF DISPERSION
A.1 Mean Deviation (Ungrouped Data)
Consider the hourly rate of the randomly selected employees in three different
schools in San Jose, Occidental Mindoro.

Find the mean deviation of the data.

School A: P290, 295, 300, 305, 310

School B: P280, 290, 300, 310, 320
School C: P300, 300, 300, 300, 300

School A
x x- -

Σ x = 1000 Σ - 30
School B
x x- -

Σ x = 1000 Σ - 60

School C
x x- -

Σ x = 1000 Σ - 120
A.2 Mean Deviation (Grouped Data)
Let us use the grouped data of the scores of students in an exam that we
organized beforehand in Page 78. However we will only need the Class Limits,
Frequency, and Class Mark for our first three columns. You knew already what its mean
is based from your answer in item #4 in Page 80.

Frequency Class Mark

Score X- |X - | f|X - |
(f) (X)
66 - 70 2 68
71 - 75 6 73
76 - 80 10 78
81 - 85 14 83
86 - 90 10 88
91 - 95 6 93
96 - 100 2 98
Total n = 50 Σ f|X - |= 280

Compute for the mean deviation of the given grouped data. (Show complete solution)
B.1 Standard Deviation and Variance (Ungrouped Data)
Let us use the data of School A in our previous task in Page 81.

School A: P290, 295, 300, 305, 310

x x- (x - )2

Σ x = 1000 Σ ( - )2 = 1000

1. Compute for the Variance of the given ungrouped data from School A. (Show
complete solution)

2. Compute for the Standard Deviation of the given ungrouped data from School A.
(Show complete solution)
B.2 Standard Deviation and Variance (Grouped Data)
Let us use the grouped data of the scores of students in an exam that we
organized beforehand in Page 78. However we will only need the Class Limits,
Frequency, and Class Mark for our first three columns. You knew already what its mean
is based from your answer in item #4 in Page 80.

Frequency Class Mark

Score X- (X - )2 f (X - )2
(f) (X)
66 - 70 2 68 -15 225 450
71 - 75 6 73 -10 100 600
76 - 80 10 78 5 25 250
81 - 85 14 83 0 0 0
86 - 90 10 88 5 25 250
91 - 95 6 93 10 100 600
96 - 100 2 98 15 225 450
Total n = 50 Σ f|X - |= 2600

3. Compute for the Variance of the given grouped data above. (Show complete
solution)

4. Compute for the Standard Deviation of the given grouped data above. (Show
complete solution)
IV. MEASURES OF RELATIVE POSITION
Suppose the scores below are the scores of students in an entrance exam.

53 63 94 54 16 26 20

82 42 10 66 3 45 8

70 78 77 98 55 31 12

Determine which score is positioned in the following quantiles:

Sample => if computed, D5 = 11th SCORE or 53
(But you still need to show complete solution for your answers)

1. Q3 =

2. Q1 =

3. D3 =

4. D7 =

5. D9 =

6. P10 =

7. P30 =

8. P50 =

9. P90 =

10. P75 =
MEASURES OF CORRELATION

A. Pearson r Moment of Correlation

Suppose the given data below are the grades of twelve BSIT students and we
want to find out if a relationship e ist between their grades in Mathematics in the
Modern World’ ) and their grades in Discrete Mathematics’ Y).

student X Y XY X2 Y2
1 89 92
2 92 93
3 89 92
4 93 93
5 90 92
6 90 90
7 91 92
8 92 88
9 91 93
10 93 92
11 95 94
12 86 88
Σ 37 Σ y 139 Σ 375 Σy 4135 Σ y 1189

Compute for the value of Pearson r and determine if there exist a relationship
between X and Y. (Show complete solution.)
 CHAPTER V
Mathematics of Finance

TOPICS
1. Simple Interest
2. Compound Interest
______________________________________________________________
LEARNING OUTCOMES
At the end of the chapter, you should be able to:
 Use Mathematical concepts and tools in other areas such as in finance,
voting, logic, business, networks, and systems.
 Support the use of mathematics in various aspects and endeavors in
life.

Topic 1: Simple Interest

When people deposit money in a bank, they are permitting the bank to use their
money and the bank may lend the deposited money to customers to buy cars or make
renovations on their homes. The bank pays the depositors for the privilege of using
their money. The amount paid to you is called interest. If people are the ones
borrowing money from a bank, the amount they pay for the privilege of using that
money is also called interest.

The person who borrows money for any purpose is a debtor or maker, and the
person or institution, which loans the money, is the lender.

The amount deposited in a bank or borrowed from a bank is called the principal.
The amount of interest paid is usually given as a percent of the principal. The percent
used to determine the amount of interest is called the interest rate.
 Interest refers to the payment for the use of the money. There are three
important factors to determine the interest earned on a deposit or the charges against
a loan. These are the following:

1. The rate of interest which is given by the bank or charge by the lender (r)
2. The length or duration of time for which money is borrowers or deposited (t)
3. The total sum of money borrowed or deposited which is called the principal (P)

The total sum at the end of the transaction period when the money is deposited
or borrowed is referred to as a amount.
The amount is equal to the sum of the principal and the interest earned. This is
represented using symbols.

F= P+I
where:
F is the Future Value
P is the principal
I is the interest

Simple interest is defined as the interest on deposit or loan, which is computed

for the full term of the loan. The simple interest I is computed by multiplying the
principal (P) by the rate of interest (r) and the length or duration of time (t) of the
deposit or loan, the formula is

I = Prt

All simple interest rates are annual rates. Thus, the term of the loan should
always be expressed in terms of years.
Other formulas can be derived from the formula simple interest (I).

P= I r= I t = I_
Rt Pt Pr

Final Amount Formula: F=P+I

Other formulas that can be derived from the formula of Final Amount (F)

P=F-I F = P (1+rt)

I=F–P P = Fj
 (1 + rt)

Example 1: Find the interest and final amount on P30,000.00 for 3 years at 7%.

Given: P = P30,000.00 r = 7% t = 3 yrs

Solution: I = Prt F=P+I

= P30,000.00 x .07 x 3 = P30,000.00 + P6,300.00
= P6,300.00 F = P36,300.00

Example 2: Mr. Quiton borrows P20,000.00 from a bank charging 13% simple
interest with the agreement that he would pay the principal and the
interest at the end of the term. If he paid P33,000.00 at the end of the
term, for how long did he use the money?

Given: P = P20,000.00 r = 13% F = P33,000.00

Solution:
I=F+P b.) t= Ij
= P33,000.00 – P20,000.00 Pr
= P13,000.00 = P13,000.00
P20,000 (.13)
= P33,000.00
P2,600.00
t= 5 years

Example 3: Mr. Quiton invested P20,000.00 in a cooperative where the interest was
P13,000.00 after 5 years. What is the interest rate of his investment?

Given: P = P20,000.00 I = P13,000.00 t = 5 years

Solution: r = I__j
Pt
= P13,000.00
P20, 000 (5)
= P13,000.00j
P100,000.00
= 0.13
r = 13 % (converted to percent)
Test Yourself!
Direction: From the given problem determine the unknown. Show your complete
solution.

1. Find the missing value:

a. P = P50, 500 r=4½% t = 3 yrs I =?
b. I = P4,230 r=7¾% t = 3 yrs P =?
c. P = P6, 950 I = P785 r = 7 3/8 % t =?
d. P =P5, 630 I = P1, 578 t = 2 yrs & 7 mos. r =?
e. P = P63, 140 r=9½% t = 8 yrs & 10 mos. F =?

2. Reymark agreed to pay P24,000.00 interest for his loan which amounts to
P160,000 at the end of 18 months. What was the rate of the interest?

3. For a bank loan payable in two and half years at 11% per annum, Mrs.
Roldan paid an interest of P17,250.00. How much was the original loan?

4. How much money is due at the end of 5 years and 8 months if P38, 000 is
deposited in cooperative that pays 14% per annum?

5. Compute for the simple interest and the amount on a P40,000.00 salary loan
at 12 1/5% simple interest for 150 days.

6. Mac agreed to pay P40,000.00 for his loan which amounts to P60,000.00 at
the end of 2 ½ years, what was the rate of the interest?

7. How long will it for P19,000.00 to earn P3,800.00 if it is invested at 7 ½%

simple interest?

8. If Bong paid P29,600 interest for the money borrowed which is P148, 000 for
4 years at what simple interest rate was money borrowed?

9. Amie lends P55, 000 at 5 3/8 % simple interest. How long had it been lent if
it earned P4,100 interests?

10. Mr. Laurence deposited P7, 500 with 18% simple interest in saving banks.
When he decided to close his account, his money grew P17,280.00.
Assuming that no withdrawals were made, how long did he deposit his
money?
 Topic 2: Compound Interest
Simple interest is generally used for loans of 1 year or less. In business
transactions covering an extended period of time, interest may earn on top of interest.
This is called Compound Interest. For loans of more than 1 year, nowadays, the interest
paid on the money borrowed is most likely a compound interest.

Compound interest is interest calculated not only on the original principal, but
also on any interest that has already been earned. It is also the interest resulting from
the periodic addition of simple interest to the principal. When interest is periodically
added to the principal and this new sum is used as the new principal for a certain
number of periods, the resulting value is called compound amount and is designated by
F. The frequency with which the interest is compounded is called the compounding
period.

In compound interest the time between successive interest computation is

called compounding or conversion period. The number of conversion periods for one
year is donated by m, while the total number of conversion periods for the whole
investment term is donated by n. Conversion periods is usually expressed by any
convenient length of time, and usually taken as an exact division of the year, such as
monthly, quarterly, semi- annually and annually. When the conversion period is:

Annually m=1
Semi- annually m=2
Quarterly m=4
Monthly m = 12

The total number of conversion periods for the whole term can be found from
the relation:

n = term x number of conversion periods per year (m)

n = tm or n = mt

The interest rate J is usually expressed or yearly rate, and must be changed to
the interest rate per conversion period rate i and can be found from the relation:

i = interest rate (r) j

conversion period (m)
i = r/m

Note: When no conversion period is stated in any investment problem, it is

assumed that the investment is compounded annually.
 The fundamental formula for compound amount is:

where:
F = compound amount
P = original principal
i = interest rate per period (i = r/m)
n = total number of conversion period for the whole term

Example 1. Find the compound amount and interest on P100,000.00 for 3 years at
10% compounded annually.

Given: P = P100,000.00 r = 10% t = 3 years m=1

i = r/m i = .10/1 = .10 n = 1 (3) = 3 periods n = tm
Solution:

= P100,000.00
= P100,000.00 (1.10)³
=P100,000.00 (1.331)
F =P133,100.00

I=F–P
=P133,100.00 – P100,000.00
I =P33,100.00

Example 2. Find the compound interest on P30,000.00 at the end of 3 years at 12%
compounded monthly.

Given: P = P30,000.00 r = 12% m = 12 t = 3 years

i = r/m i = .12/12 = .01 n = 3 (12) = 36 periods n = tm
Solution:

= P30,000.00 (1 + 0.01)36
= P30,000.00 (1.01)36
= P30,000.00 (1.4307687835915805042604675701926)
= P42,923.06

I=F–P
=P42,923.06 – P30,000.00
I =P12,923.06
Test Yourself!

Direction: Solve each of the following completely. Show complete solution.

1. Find the value of the following:

a.)

b.)

c.)

d.)

e.)

2. What is the compound amount if P55,000.00 is invested for 5 years at 12%

compounded quarterly?

3. Accumulate P50,00.00 for 3 years at 12% compounded semi- annually.

4. Mrs. Usita borrowed P1,000,000.00 from a cooperative for 8 years and 7

months. If the cooperative charged an interest rate at 24% compounded
monthly, how much will she repay at the end of the term?

5. What amount of money will be required to repay a loan of P30, 000 on June
1, 2008. If the loan was made on September 1, 2001 at the interest rate of
14% compounded quarterly.