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Grade 3 - Spring Semester 2020-2021: Abdulnasser M. Fatah
Grade 3 - Spring Semester 2020-2021: Abdulnasser M. Fatah
Faculty of Engineering
Petroleum and Mining Engineering Department
The following list the different compounding periods and the occurrence in one
year which already used in Economics :
annually once a year
semi- annually twice a year
Quarterly every 3 months
Bi – monthly every 2 months
Monthly every month
Semi- monthly twice a month
Weekly 7 days
Daily 24 Hours
Continuously ---------------
Examples
1- The sum of P10, 000 was deposited to a fund earning interest 10% per annum
compounded quarterly, what was the principal in the fund at the end of a year?
Given: P = 10,000
r = 10% per year compounded quarterly
n= 3 years (4) = 12 quarters
Required: The amount in the fund at the end of 3 years
Solution: Solving for the rate of interest per period.
i = r /m = 10 / 12 = 2.5 % per quarter
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2-If you borrow money from your friend with simple interest of 12%, find the present
worth of P20, 000, which is due at the end of nine months ?
Given: F = 20,000
Solution :
F = P (1 + ni)
20,000 = P [ 1 + ( 9/12 ) (0.12) ]
20,000 = P (1.09)
P = 18,348.6
Examples