ILIGAN CITY NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL DEPARTMENT

GENERAL MATHEMATICS
SELF- LEARNING ACTIVITY
Q2Wk2Day2 Solves problems involving compound interests (M11GM- im=Nominal
j=INTEREST
IIb-2). Rate m=FREQUENC ONE
RATE PER
(ANNUAL Y OF CONVERSIO
CONVERSIO
INTEREST CONVERSIONS N PERIOD
Specific Objectives for the Day: RATE)
N PERIOD
1. Determine the formula in finding for the interests when 3%
compounded more than once a year and the maturity value; and Compounde 0.03/1 =
2. Solve problems involving interests when compounded more than 1 1 year
d Annually 0.03 = 3%
once a year. 𝒊𝟏 = 𝟎. 𝟎𝟐
3%
References: Compounde 0.03/2 =
General Mathematics Module 6 d Semi- 2 0.015 = 6 months
Annually 1.5%
Development of the Lesson: 𝒊𝟐 = 𝟎. 𝟎𝟐
3%
0.03/4 =
Compounde
4 0.0075 3 months
In the previous lesson you learned about compound d Quarterly
=0.75%
interest, wherein the interest earned at certain time interval is 𝒊𝟒 = 𝟎. 𝟎𝟐
automatically reinvested to yield more interest or interest is 3%
0.03/12 =
calculated on the principal and also on the accumulated past Compounde
12 0.0025 = 1 month
interest. d Monthly
0.25%
In this lesson you will learn how to find maturity 𝒊𝟏𝟐 = 𝟎. 𝟎𝟐
value, interest, and present value, when compound interest 3% 0.03/365
is computed more than once a year. Compounde
365 = 1 day
d Daily
0.000082
𝒊𝟑𝟔𝟓 = 𝟎. 𝟎𝟐
=0.0082%

Hi there! This is again your servant this day -

teacher Daisy! Compare the compound amounts with a given
principal of Php 20,000 after 4 years when compounding
annually that earn an annual interest rate of 2% at the end of
the year and semi-annually that also earn an annual interest
rate of 2% in two terms; 1% after 6 months and another 1%
after another 6 months.
Question: Which investment scheme gives higher interest?
Why?
From the Maturity (Future value) and compound
interest formula F=P(1 + r)t we can compute the compound
amount when principal (P) is invested at an annual interest rate
( j ) compounded annually, thus F = P(1 + j)t where j = i(m)/m
is the rate for each conversion period.
The formula in finding the compound amount when
compounding is computed more than once a year.

MATURITY VALUE, COMPOUNDING m TIMES A YEAR

(COMPOUND AMOUNT)
𝑭 = 𝑷(𝟏 + 𝒋)𝒏 Derivation of the Formula when P is unknown:
Option 1 Option 2 has the same 𝑭 = 𝑷(𝟏 + 𝒋)𝒏 𝒊𝒎 𝒎𝒕
Time
(Compounded (Compounded semi-annually structure as 𝑭 𝑷(𝟏 + 𝒋) 𝒏 𝑭 = 𝑷 (𝟏 + )
𝒎
(in year) =
annually at 2%) at 2%) 𝑭 (𝟏 + 𝒋)𝒏 (𝟏 + 𝒋)𝒏 𝒊𝒎 𝒎𝒕
𝑭 𝑷 (𝟏 + )
Amount at the end of 𝒎 𝒎𝒕 𝑭 𝒎
Amount at the end of the year 𝒊 𝑷= =
the year = 𝑷 (𝟏 + ) (𝟏 + 𝒋)𝒏 𝒊𝒎 𝒎𝒕 𝒊𝒎 𝒎𝒕
𝒎 (𝟏 + ) (𝟏 + )
𝒎 𝒎
½ (20,000)(1.02) = 20,200 𝑭
𝑷=
(20,000)(1.02) = 20,400 𝒊𝒎 𝒎𝒕
(𝟏 + )
1 (20,200)(1.02)= 20, 402 𝒎
where
1½ (20,402)(1.02) = 20,606.02 F = maturity (future) value
(20,400)(1.02) = 20,808 (20,606.02)(1.02) = P = principal
2 im=nominal rate of interest (annual rate)
20,812.08
(20,812.08)(1.02) = m = frequency of conversion
2½ t = term / time in years
21,020.20
(20,808)(1.02) = 21,224.16 𝒊𝒎
𝒋 = refer to the interest rate per conversion
(21,020.20)(1.02) =
3 𝒎
21,230.40 period
(21,230.40)(1.02) = n = mt refer to the number of times that interest
3½
(21,224.16)(1.02) = 21,442.70 is compounded (total number of
21,648.64 (21,442.70)(1.02) = conversion periods)
4
21,657.13
EXAMPLES: Solve the following problems. Show the complete solution.
Possible Answer: Option 2 investment scheme gives higher interest
than Option 1, because interest in Option 2 is compounded twice a year 1. Find the maturity value and interest if Php10,000 is deposited in a
with a 6 months conversion period, and the frequency of conversion is 2. bank at 2% compounded quarterly for 5 years.
Since the total number of conversion period is 8 because the investment
Solution:
covered is 4 years. 1% is the rate of interest for each conversion period 2%
with a nominal rate of 2%. Given : P = 10,000, 𝑚 = 4, 𝑖 4 = 2% = = 0.02, t = 5 years
100%
Find : a.) Maturity value F
EXAMPLES OF NOMINAL RATES AND THE CORRESPONDING b.) Compound Interest IC
FREQUENCIES OF CONVERSION AND INTEREST RATE FOR
Step 1 - Compute for the interest rate in a conversion period:
EACH PERIOD
𝑖 𝑚 𝑖 4 0.02
𝑗= = = = 0.005
𝑚 4 4
Step 2 – Compute for the total number of conversion periods:
 𝑛 = 𝑚𝑡 = (4)(5) = 20 𝐹 50,000
𝑃= = = 𝑷𝒉𝒑𝟑𝟏, 𝟑𝟕𝟎. 𝟔𝟐
Step 3 – Compute for the maturity value: (1 + 𝑗)𝑛 (1 + 0.06)8
𝐹 = 𝑃(1 + 𝑗)𝑛 = (10,000)(1 + 0.005)20 = 𝑷𝒉𝒑𝟏𝟏, 𝟎𝟒𝟖. 𝟗𝟔 Answer: Php31,370.62 is the present/principal value
Step 4 – Compute for compound interest:
𝐼𝐶 = 𝐹 − 𝑃 = 11,048.96 − 10,000 = 𝑷𝒉𝒑𝟏, 𝟎𝟒𝟖. 𝟗𝟔 2. What is the present value of Php25,000 due in 2 years and 6 months
Answer: Php11,048.96 is the maturity (future) value if money is worth 10% compounded quarterly?
and Php1,048.96 is the compound interest. Solution:
10% 1
Given : F = 25,000, 𝑚 = 4, 𝑖 4 = 10% = 100% = 0.10, t = 2 2 years
2. Find the maturity value and interest if Php10,000 is deposited in a
Find : Present Value P
bank at 2% compounded monthly for 5 years.
Step 1 - Compute for the interest rate in a conversion period:
Solution: 𝑖 𝑚 𝑖 4 0.10
Given : P = 10,000, 𝑚 = 12, 𝑖 12 = 2% =
2%
= 0.02, t = 5 𝑗= = = = 0.025
100% 𝑚 4 4
years Step 2 – Compute for the total number of conversion periods:
Find : a.) Maturity value F 1
𝑛 = 𝑚𝑡 = (4) (2 ) = 10
b.) Compound Interest IC 2
Step 3 – Compute for the maturity value:
Step 1 - Compute for the interest rate in a conversion period:
𝐹 25,000
𝑖 𝑚 𝑖 12 0.02 𝑃= = = 𝑷𝒉𝒑𝟏𝟗, 𝟓𝟐𝟗. 𝟗𝟔
𝑗= = = = 0.0016667 (1 + 𝑗)𝑛 (1 + 0.025)10
𝑚 12 12
Step 2 – Compute for the total number of conversion periods: Answer: Php19,529.96 is the present/principal value
𝑛 = 𝑚𝑡 = (12)(5) = 60
Exercises: Solve the following problems. Encircle the letter that
Step 3 – Compute for the maturity value:
corresponds to the correct answer.
𝐹 = 𝑃(1 + 𝑗)𝑛 = (10,000)(1 + 0.0016667)60 = 𝑷𝒉𝒑𝟏𝟏, 𝟎𝟓𝟎. 𝟕𝟗
1. Php 25,000 is deposited in a bank at 1.5% compounded semi-
Step 4 – Compute for compound interest: annually for 8 yrs. Compute for the maturity value and interest.
𝐼𝐶 = 𝐹 − 𝑃 = 11,050.79 − 10,000 = 𝑷𝒉𝒑𝟏, 𝟎𝟓𝟎. 𝟕𝟗 a. F=Php32,165.28 & P=7,165.28
Answer: Php11,050.79 is the maturity (future) value b. F=Php38,064.24 & P=13,064.24
and Php1,050.79 is the compound interest. c. F=Php27,132.12 & P=2,132.12
d. F=Php28,174.80 & P=3,174.80
3. Cris borrows Php50,000 and promises to pay the principal and 2. How much will Mr. Delos Reyes repay his loan, both the
interest at 12% compounded monthly. How much must he principal and interest at 15% after 5 years compounded
repay after 6 years? quarterly if the amount of loan is Php80,000?
Solution: a. Php211,821.67 c. Php223,325.75
Given : P = 50,000, 𝑚 = 12, 𝑖 12 = 12% =
12%
= 0.12, t = 6 b. Php143,283.59 d. Php167,052.16
100%
years 3. Suppose Mrs. Reyes invested money at 2% compounded
Find : Maturity value F monthly. Find the present value of Php 40,000 that will due for
Step 1 - Compute for the interest rate in a conversion period: 4.5 years.
𝑖 𝑚 𝑖 12 0.12 a. Php36,494.35 c. Php59,124.74
𝑗= = = = 0.01 b. Php25,298.59 d. Php15,616.98
𝑚 12 12
Step 2 – Compute for the total number of conversion periods: 4. How much money should Mr. Smith invest in the bank that
𝑛 = 𝑚𝑡 = (12)(6) = 72 earn 3.5% compounded semi-annually if Mr. Smith needs
250,000 in 5 years?
Step 3 – Compute for the maturity value:
a. Php25,657.91 c. Php210,182.15
𝐹 = 𝑃(1 + 𝑗)𝑛 = (50,000)(1 + 0.01)72 = 𝑷𝒉𝒑𝟏𝟎𝟐, 𝟑𝟓𝟒. 𝟗𝟕 b. Php31,678.29 d. Php33,536.68
Answer: Php102,354.97 is the maturity (future) value

We may also compute for present value when interest 1. D 2. D 3. A 4. C

is compounded more than once a year by using this formula:
Evaluation:
PRESENT VALUE P AT COMPOUND INTEREST
𝑭 𝑭 General Instructions: Do what is indicated. Show your complete
𝑷= = solutions. NO SOLUTIONS, NO POINTS. (2 pts. each)
𝒊𝒎 𝒎𝒕 (𝟏 + 𝒋)𝒏
𝟏 + (𝒎)
where RUBRICS FOR RATING:
F = maturity (future) value 3 POINTS 2 POINTS 1 POINT
P = principal / present value No Solutions but
im=nominal rate of interest (annual rate) Complete Solutions Incomplete with Correct
m = frequency of conversion and Correct Solutions but with Answer i.e. give
t = term / time in years Answer Correct Answer the answer
directly.
EXAMPLES: Solve the following problems. Show the complete solution.
1. Find the present value of Php50,000 due in 4 years if money is 1. Accumulate Php15,000 for 2 years at 15% compounded
invested at 12% compounded semi-annually. monthly.
Solution:
12% 2. How much should Kaye set aside and invest in a fund earning
Given : F = 50,000, 𝑚 = 2, 𝑖 2 = 12% = 100% = 0.12, t = 4 years
2% compounded quarterly if she needs Php75,000 in 15
Find : Present Value P months?
Step 1 - Compute for the interest rate in a conversion period: 3. Peter is planning to invest Php100,000. Bank A is offering 5%
𝑖 𝑚 𝑖 2 0.12 compounded semi-annually while Bank B is offering 4.5%
𝑗= = = = 0.06
𝑚 2 2 compounded monthly. If he plans to invest this amount for 5
Step 2 – Compute for the total number of conversion periods: years, in which bank should he invest?
𝑛 = 𝑚𝑡 = (2)(4) = 8
Step 3 – Compute for the maturity value: