COMPOUND INTEREST

Find the future value and the amount of interest of RM 2000 which was invested for:

a) 3 years and 3 months at 8% compounded quarterly

P= 2000 i=k/m=0.08/4=0.02 n=m(t)= 4(39/12)=13
S=P(1+i)^n
=2000(1+0.02)^13
=RM 2587.21
I=S-P
=2587.91-2000
=587.91
b) 120 days at 13% compounded daily
I=k/m = 0.13/360 = 13/36000 n= m(t) = 360(120/360)=120
S=P(1+i)^n
= 2000(1+13/36000)^120
= RM 2088.56
I=S-P
= 2088.56-2000
= RM 88.56
c) 2 years and 8 months at 9% compounded every 4 months
i=k/m= 0.09/3=0.03 n=m(t)=3(32/12)=8
S=2000(1+0.03)^8
=RM 2533.54
I=2533.54-2000
= RM 533.44
d) 2 years at 8% compounded weekly
I=k/m= 0.08/52=1/650 n=m(t)=52(2)=104
S=2000(1+1/650)^104
= RM 2346.73
I=2346.73-2000
=RM 346.73

A man deposited RM 6400 into a saving account that earned 8% interest compounded semi-
annually. How long would it take for the investment to become RM 7786.68.

P=6400 S=7786.68 i=k/m=0.08/2=0.04 n=m(t)=2t

S=P(1+i)^n

7786.68=6400(1+0.04)^2t

1.2166=1.04^2t

2t log1.04=log1.2166

2t=log1.2166/log1.04

2t= 5

t= 5/2 or 2.5 years

At what nominal rate compounded every 4 months will an investment of RM 5200 accumulated to
RM 6784.82 after 3 years.

P=5200 S=6784.82 i=k/m=k/3 n=m(t)=3(3)=9

S=P(1+i)^n

6784.82=5200(1+k/3)^9

1.3048=(1+k/3)^9

(1+k/3)^9=1.3048

1+k/3=9^SQ1.3048

1+k/3=1.030

k/3=0.030

k=0.09 or 9%

After 3 years and 6 months a sum of money will worth RM 9524.22 at 16% compounded quarterly.
Find the present value of the loan and the interest charged.

P=? S=9524.22 i=k/m=0.16/4= 0.04 n=m(t)=4(42/12)=14

S=P(1+i)^n

9524.22=P(1+0.04)^14

9524.22=1.7318 P

P= RM 5499.99

I=S-P

=9524.22-5499.99

=RM 4024.23
RM 15000 was deposited in a saving account at 8% compounded quarterly for 5 years and 6 months.
After 3 years, RM 8500 was withdrawn and the balance was invested for the ensuring period.
Calculate the amount in the account at the end of the investment period.

P=15000 i=k/m=0.08/4=0.02 n=m(t)=4(3)=12

S=P(1+i)^n

=15000(1+0.02)^12

=RM 19023.63

P=19023.63-8500=10523.63 i=k/m=0.08/4=0.02 n=m(t)=4(30/12)=10

S=10523.63(1+0.02)^10

= RM 12828.25

Ahmad saved RM 6500 in a saving account which pays 9% compounded every 4 months for 3 years.
2 years after his saving, he saved another RM 2000. Find the amount in the account at the end of
investment period.

P=6500 i=k/m=0.09/3=0.03 n=m(t)=3(2)=6

S=6500(1+0.03)^6

=7761.34

P=7761.34+2000=9761.34 i=k/m=0.09/3=0.03 n=3(1)=3

S=9761.34(1+0.03)^3

= RM 10666.48

Salina invested RM 23000 for 4 years and 4 months. This investment is offered 6% compounded
every 2 months for the first 2 years and 18% compounded monthly for the ensuring period.
Calculate the future value of the investment.

P=23000 i=k/m=0.06/6=0.01 n=m(t)=6(2)=12

S=23000(1+0.01)^12

=25916.98

P=25916.98 i=k/m=0.18/12=0.015 n=m(t)=12(28/12)=28

S=25916.98(1+0.015)^28

=RM 39321.82