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Compound Interest

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Julovern Molvizar
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30 views22 pages

Compound Interest

Uploaded by

Julovern Molvizar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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COMPOUND INTEREST

Engr. Julovern S. Molvizar


Maturity (Future Value) and Compound Interest
𝒕
𝑭 = 𝑷 (𝟏+𝒓 )
Where:

P = principal or present value


F = maturity (future) value at the end of the term
r = interest rate
t = term/ time in years
Example 1
Find the maturity value and the compound
interest if P 10,000 is compounded annually at
an interest rate of 2% in 5 years.
Example 2

• Find the maturity value and interest if P


50,000 is invested at 5% compounded
annually for 8 years.
Example 3
• Suppose your father deposited in your bank
account P 10,000 at an annual interest rate of 0.5%
compounded yearly when you graduate from
kindergarten and did not get the amount until you
finish Grade 12, How much will you have in your
bank account after 12 years?
Example 4

• What is the present value of P 50,000 due in 7


years if money is worth 10% compounded
annually?
Example 5

• 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 P 200,000 after 6 years?
Example 6
• Mr. Ocampo invested P150,000 at 10%
compounded annually. He plans to get this amount
after 6 years for his son’s college education. How
much will he get?
Example 7
• Mr. Bautista aims to have his investment
grow to P500,000 in 4 years. How much
should he invest in an account that pays 5%
compounded annually?
Example 8
• Mrs. Versoza wants to compare simple and
compound interest on an P350,000 investment for 3
years and 3 months.
a. Find the interest if funds earn 6.5% simple
interest.
b. Find the interest if funds earn 6.5%
compounded annually
c. Find the difference between two interests
Maturity Value, Compounding m times a
year

( )
(𝒎 )
𝒊
𝑭 =𝑷 𝟏+ 𝒎𝒕
𝒎
Example 1

• Find the maturity value and interest if P10,000 is


deposited in a bank at 2% compounded quarterly for
5 years.
Example 2

• Find the maturity value and interest if P10,000 is


deposited in a bank at 2% compounded monthly for
5 years.
Example 3

• The amount of P12 800 in 4yrs. At 5% compounded


quarterly is ______?
Example 4

• P500 000 was deposited at an interest of 6%


compounded quarterly. Compute the compounded
interest after 4 years and 9 months.
Example 5

• Find the total amount of P15,000 in 3yrs. At 2.5%


compounded bimonthly
Example 6

• Cian lends P45,000 for 3 years at 5% compounded


semi-annually. Find the future value and interest of
this amount.
Example 7

• Tenten deposited P10,000 in a bank which gives 1%


compounded quarterly and let it stay there for 5
years. Find the maturity value and interest.
Assignment
• How much should you set aside and invest in a fund earning 9%
compounded quarterly if you want to accumulate P200,000 in 3
years and 3 months?

• How much should you deposit in a bank paying 2% compounded


quarterly to accumulate an amount of P80,000 in 5 years and 9
months?

• Miko has P250,000 to invest at 6% compounded monthly. Find the


maturity value if he invests for (a) 2 years? (b) 12 years? (c) How
much is the additional interest earned due to the longer time.
Quiz
• James aims to accumulate 1 million pesos in 12 years.
Which investment will require the smallest present
value?

A. 8% simple interest
B. 8% compounded annually
C. 8% compounded semi-annually
D. 8% compounded quarterly
E. 8% compounded monthly
Quiz
• Maryam is planning to invest P150,000. Bank A is
offering 7.5% compounded semi-annually while Bank B
is offering 7% compounded monthly. If she plans to
invest this amount for 5 years, In which bank should
she invest?

• Yani has a choice to make short term investments for


her excess cash P60,000. She can invest at (a) 6%
compounded quarterly for 6 months or (b) 5%
compounded semi-annually for 1 year. Which is larger?
Slide Title
Product A Product B
• Feature 1 • Feature 1
• Feature 2 • Feature 2
• Feature 3 • Feature 3

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