ACTIVITY 1: COMPOUND INTEREST 

Instructions: Read and analyze each question carefully, answer the given real-life word problem.
Show your solution based on the given below. Organize and label your work on your answer
sheets.  

A. What is the present value of P65,000 at 11% compounded annually for 4 years?
 Given:  A = 65,000
n = 4 (compounded years) x 1 (Annual) = 4
i = 11% = 0.11
P =? 
Formula: A= P (1 + i) n
Solution:
65,000 = P (1 + 0.11)4
P= 65,000 / (1 + 0.11)4
P= 65, 000 / (1.11)4
P= 65, 0000 / 1.518
P = 42, 819.49
B. A P 1, 000,000 – trust fund was set up and to be used by an 8 – year old nephew when he
goes to college. In 8 years, how much will the fund be if the investment rate is 7.5%
compounded quarterly? 
Given:  P = 1,000,000
n = 8(years compounded) x 4(Quarterly) = 32
i = 7.5% / 4= 1.875% = 0.01875
A =?
Formula: A= P (1 + i) n
Solution:
A= 1,000,000 (1+0.187)32
A= 1,000,000(1.187)32
A=1,000,000(241.22)
A= 241,220,000

C. Ryza borrows P 150,000. At what rate compounded bi – monthly will her interest be
if she agrees to pay P10,000 more at the end of 2 years? 
 Given: A= 150,000
n = 2 x 12(2) (bi-monthly) = 48
P = 10,000
i=?
Formula: A = P (1 + i) n
Solution:
150,000= 10,000(1+i)48
15 = (1+i)48
1.058 = 1+i
1.058-1 = i
0.058 = i
i = 0.058 or 5.8%
D. Find the amount at the end of 5 years if P17,535 is invested at 2.45% compounded
quarterly. 
Given: P = 17,535
n = 5 x 4 = 20
i = 2.45% / 4 = 0.612% = 0.0061
A=?
Formula: A= P (1 + i) n
Solution:
A = 17,535(1+0.0061)20
A= 17,535(1.0061)20
A= 17,535(1.129)
A = 19,797.015

E. If money is worth 6% compounded bi – monthly, find the present value of P 125,700 for
2 years. 
Given: A= 125,700
n=2x12 (2) = 48
i = 6% / 24 = 0.25% = 0.0025
P=?
Formula: A= P (1 + i) n
Solution:
125,700 = P (1+0.0025)48
125,700 = P (1.0025)48
125,700 = P (1.127)
P = 125,700 / 1.127
P = 111,535.04

F. If the rate is at 1.25% effective, how long will P5,000 become P5,500?

Given: A = 5500
P =5000
n =?
i =1.25%,
Formula: A= P (1 + i) n
Solution:
A= 5000(1+0.012)8
A = 5000 (1.012)8
A= 5,000(1.10)
A=5,500
So, it takes 8 years compounded annually for 5,000 to become 5,500.