I = Prt

= P15, 000 x .09875 x138/360

= P567.8125 or P567. 81

Note: When a type of interest is not specified in any problem; the user may apply the
Banker’s Rule.

2
 Exercise 1.4

Interest between Dates

Name: Date:
Section: Rating:

Direction: Solve each of the following, show your complete solution.

1. Using the four methods, find the interest on P9, 500 from October 29, 2006 to May
18, 207 at 10 ¼% simple interest.

2. Find the interest and amount on P18, 000 at 10 3/5% simple interest from August
9, 2006 to March 29, 2007 using Banker’s Rule.

3. Find the exact interest and amount on P23, 000 at 13 ¾ % simple interest
from August 9, 2006 to December 17, 2006.

4. What amount should be paid on the due date January 6, 2008 on a loan of P30, 000
made on July 2, 2007 with 11 3/5% simple interest?

5. How much will P15, 500 be worth on October 10, 2007 if the said principal is
invested at 15 4/5 % simple interest on April 10, 2007?

6. Find the amount due on February 16, 2008, if the investment was made on June 7,
2007 at 12 ¼ % simple interest is P56, 800.

7. If Miss Brown invests P30, 000 at 11 5/8 % simple interest on June 20, 2006,
how much can she collect from this investment on January 10, 2007? Assume
exact interest and actual time.

8. If P28, 500 is invested on June 5, 2007 at 11 ½ % it will accumulate to how much on

March 6, 2008? Use Banker’s Rule.

9. On April 12, 2007, Bert invested P48, 000 at 10 1/5 %;

a.) How much can he collect from his investment, interest included on November 2,
2007 using ordinary interest and approximate time?

10. Find the interest and amount at 12 % on March 11, 2007 which amount to P27, 500
on November 7, 2007? Use Banker’s Rule.

3
Lesson 1.5 Amount of Simple Interest/ Accumulation at Simple Interest

We know that the principal means the sum of money on the origin date while amount F is
the sum of money at the end of the term. Now, we can have: P accumulates or grows to the value
F at the end of t years.

Objective: At the end of the lesson the student should be able to solve the amount due at the end
of the term or to accumulate principal (P) at the end of the term.

At the end of the term for which interest is to determined, the amount due on a lender is
the sum of the principal and invests and is designed by the symbol (F). This called final amount
or maturity value and is given by the formula:
F=P+I
F + P + Prt
By factoring, we have F = P (1 + rt)

Accumulation is the process of determining the amount F of a given principal P due at a

specified time t. to accumulate a principal P for t years means to solve for the final amount by
applying the formula:
F = P (1 +rt)
To illustrate the statement above, let us work on the following examples.

Example 1: Accumulate P11, 000 for 7 months at 101 4/5 % simple interest.

Given: P = P11, 000 r = 10 4/5 % t = 7 months

Solution:
F = P (1 + rt)
= P11, 000 (1 + (.108) (7/12))
= P11, 000 (1 + .063)
= P11, 000 (1.063)
=P11, 693. 00

Example 2: Accumulate P14, 500 for 115 days at 14 1/8 % simple interest.

Given: P = P14, 500 t = 115 days r = .14125

Solution:
F = P (1 + rt)
= P14, 500 (1 + (.14125) (115/360))
= P14, 500 (1 + .045121527)
= P 14, 500 (1.045121527)
= P15, 154. 26
Example 3: A businesswoman borrows P19, 900 for 2 years at 9 ¼ % simple interest. How
much must she repay?

Given: P = P19, 900 t = 2 years r=9¼%

Solution:
F = P (1 + rt)
= P19, 900 (1 + (.0925) (2))
= P19, 900 (1.185)
= P23, 581. 50

Example 4: Accumulate P17, 700 at 15 3/5% simple interest from November 6, 2005 to April
11, 2007.

4
Given: P = P17, 700 r = 15 3/5 % t = November 6, 2205 to April 11, 2007

Solution:
Exact number of days F = P (1 + rt)
November 6, 2006 = 310 = P17, 700 (1 + (.156) (156/360))
December 31, 2006 = 365 = P17, 700 (1 +. 0676)
55 = P17, 700 (1. 0676)
April 11, 2007 = 101 = P18, 896. 52
156 days

Example 5: How much is to be repaid by King if he borrowed P22, 00 at 9 ½ % for 3 years

and 4 months?

Given: P = P22, 000 r=9½% t = 3 yrs. & 4 mos.

= 3 4/12 or 3 1/3 yrs.
Solution:
F = P (1 + rt)
= P22, 00 (1 + (.095) (10/3))
= P22, 000 (1 + .316666666)
= P22, 000 (1.316666666)
= P28, 966.67

5
 Exercise 1.5
Amount of Simple Interest/ Accumulation of Simple Interest

Name: Date:
Section: Rating:

Direction: Solve the following problems completely.

1. If money is worth 16% simple interest which is due in 5 years, what is the amount of
28, 000 loan?

2. Accumulate P60, 00 at 12. 5% simple interest for 2 years and 8 months.

3. Accumulate P75, 000 in six years at 12. 45% simple interest.

4. How much will a P50, 000 loan at 10% simple interest be at the end of 4 years?

5. Accumulate P88, 500 at 10.25% simple interest from June 12, 2007 to March 12, 2008.

6. Find the amount due on February 10, 2008, if the money borrowed on July 7, 2007
was P15, 000 at 12 2/5 % simple interest?

7. Determine the amount due if P23, 800 was borrowed at 12. 75% for 2.5 years.

8. Accumulate P24, 000 for 3 years and 6 months at 18% simple interest.

9. On March 29, 2007, Jet borrowed P25, 000 at 11. 25 % simple interest. What will be
the amount on September 30, 2007?

10. The money borrowed on June 12, 2007 was P25, 000 at 11 1/8% simple interest. How
much will be the amount on December 3, 2007?

6
Lesson 1.6 Present Value/ Discounting at Simple Interest

In general, the present value corresponds to the face value or the principal. The current
value of a future amount is the present value of a loan or investment. When computing the
present value, we use the rate of interest currently paid on money invested by other financing
institutions or banks. The rate of interest is what money is currently worth and P refers to the
discounted value of F on the day which is t, years before the due date of F.

Objective: At the end of the period the student should be able to solve the present value or
discount an amount (F) for the given term.

When the money is worth the rate r, to discount an amount F for t years,
use P =F
1 + rt
In other words, to discount refers to find the present value P. We can also say that
discounting is the process of determining the present value P of any amount due in the future.

Example 1: How much must be invested in order to have P17, 000 at the end of 3 years and
6 months if the money’s worth is 12% simple interest?
Given: F = P17, 000 r= 12% t = 3.5 years
Solution:
P= F
1 + rt
= P17, 000
1+ (.12) (3.5)
= P17, 000
1.42
= P11, 971. 83

Example 2: Determine the present value of P60, 000 at 15. 8 % simple interest at the end of
160 days.
Given: F = P60, 000 r = 15. 8% t = 160 days
Solution:
P= F
1 + rt
= P60, 000
1 + (.158) (160/360)
= P60, 000
1.07022222
= P56, 063. 12

Example 3: Discount P55, 000 for 11 months at 14 ¼ %v simple interest.

Given: F= P55, 000 r = 14 ¼% t = 11 months

Solution:
P= F
1 + rt
= P55, 000
1 + (.1425) (11/12)
= P55, 000
1.130625
= P48, 645. 66

7
Example 4: Discount P17, 800 for 125 days at 8 7/8% simple interest.

Given: F = P17, 800 r = 8 7/8% t = 125 days

Solution:
P= F
1 + rt
= P17, 800
1 + (.08875) (125/360)
= P17, 800
1 + .030815972
= P17, 8000
1.030815972
= P17, 267. 87

Example 5: How much must be invested in order to have P85, 750 at the end of 7
years, money is worth 6% simple interest?

Given: F = P85, 750 r = 6% t = 7 years

Solution:
P= F
1 + rt
= P85, 750
1 + (.06) (7)
= P85, 750
1 + .42
= P85, 750
1.41
= P60, 387. 32

8
 Exercise 1.6
Present Value/ Discounting at Simple Interest

Name: Date:
Section: Rating:

Direction: Solve the following problems completely.

1. Discount P45, 310 at 11 ½% simple interest for 175 days.

2. Discount P52, 000 at 20% simple interest for 8 years and 6 months.

3. Discount P18, 800 for 2 years and 9 months at 9 5/8% simple interest.

4. At 13% simple interest, what is the present value of P8, 122 due in 30 months?

5. Find the present value of P59, 800 due at the end of 4 years if money is worth 12 ½
% simple interest.

6. What sum would accumulate to P80, 000 at 10.5% simple interest for 6 years and
5 months?

7. Determine the present value of a 5 month, 13.5% simple interest loan if its final amount
is P3, 235.

8. What is the present value of P40, 000 – 60 day loan charged at 17.5% simple interest?

9. What is the present value of a P90, 000 - 4- month loan charged at 18.6% simple interest?

10. How much must be invested today at 20% simple interest for 1 year and 9 months to have
P54, 000?

9
Lesson 1.7 Simple Discount/ Discount Interest

Like simple interest, discount interest is the money paid for borrowing. Unlike simple
interest, however, discount interest is charged at the time the loan that has been negotiated is
executed. Whereas simple interest is paid on the maturity date when it is added to the amount of
the loan applied for on the origin date, discount interest is charged in advance and is taken from
maturity value of the loan applied for on the origin date.

Discount interest (Id) depends on 3 factors:

1. The maturity value of the loan (F), which is the amount of the loan applied for on the
origin date
2. The discount interest rate (d) expressed in percent and to be computed on F; and
3. The term of the loan or term of discount (t) expressed in years.

Objective: At the end of the lesson the student should be able to solve the discount interest,
Discount rate and term of discount.

A discount is a deduction from the final amount of maturity value (F) of a loan or
obligation. A simple discount is often called bank discount or interest-in-advance. The amount of
money that the borrower receives on the origin dates is proceeds (P) and is equivalent to what
was referred to as the principal in the previous lessons.
Bank discount or interest-in-advance can be computed by means of the formula:

D = Fdt
Where:
D = amount of discount
F = final amount or maturity value
d = discount rate
t = term of discount
Other formula that can be derived from the above are

D= D t= D F= D
Ft Fd dt

Proceeds (P) = F- D or P = F (1 – dt)

Final amount formula: F= P

1 - dt

Example 1. Miss Karie borrowed P15, 800 for 9 months from Miss Kay who charge 11 1/8%
simple discount. How much money did Miss Karie receive?
Given: F = P15, 800 d = 11 1/8% t = 9 months
Solution:
D = Fdt P=F-D
= P15, 800 x .11125 x 9/12 = P15, 800 - P1, 318.31
= P1, 318.31 = P14, 481.69

Example 2. How much loan would Mr. Kin ask for, if he needs P12, 500 cash which will be
repaid in two years and three months with 10 4/5% simple discount?

Given: P = P12, 500 d = 10 4/5 % t = 2 years & 3 months

Solution:
F= P
(1 + dt)
10
 = P12, 500
(1 – (.108) (2.25))
= P12, 500
1 - .243
= P12, 500
.757
F= P16, 512.55

Example 3. How long will it take for P8, 800 to amount to P10, 300 if the discount rate is 11
¼ %?

Given: P = P8, 800 F = P10, 300 d = 11 ¼ %

Solution:
D=F–P
= P10, 300 – P8, 800
= P1, 500

t= D
F
d
= P1, 500
P10, 300 x .1125
= P1, 500_
1158.75
t= 1.29 years

Example 4. If the proceeds of a loan of 12, 450 will be paid with 12, 840 at the end of 1 year
and 9 months. What is the discount rate?

Given: P = P12, 450 F = P12, 840 t = 1 year & 9 months

Solution:
D=F–P
=P12, 840 – P12, 450
D = P390

d= D
F
t
= P390
(P12, 840) (1.75)
= P390 _
P22, 470
= .017356
d= 1.7356%

Example 5. If P30, 000 is due on December 16, 2007, find the proceeds on April 16, 2007, if
the discount interest rate is n11 ½ %/

Given: F = P30, 000 d = 11 ½ %

t = April 16, 2007 to December 16, 2007 = 8 months

Solution:
P = F (1 – dt)
= P30, 000 (1 – (.115) (8/12))
= P30, 000 (1 - .076666666)
11
=

P
3
0
,

0
0
0

(
.
9
2
3
3
3
3
3
3
3
)

P
2
7
,

7
0
0

12
 Exercise 1.7
Simple Discount/ Discount Interest

Name: Date:
Section: Rating:

Direction: Solve the following problems completely.

1. Myra borrowed money amounting to P25, 000 from Lena who charged a discount rate
of 15 ½ % for 4 years. How much interest will be deducted in advance from the loan?

2. How much money would Bokyo receive from the bank if bank if he loans P30, 000 at a
discount rate 13 ¾ % for 6 years?

3. Miss Tee So borrowed in a credit union charging 15 % interest in advance. If she

received P60, 000 from the credit union, how much would she pay at the end of 5
years?

4. Mr. Tan made a loan of P40, 000 wherein he received P25, 000. If the discount rate
charged is 17%, when is the loan due?

5. How much should be borrowed if Lino wants P20, 000 payable in three years
with discount rate of 15%?

6. On October 27, 2006, Mr. Pedro San Isidro applied a P60, 000 loans. He received P48,
000 after deducting the interest in advance. If the loan is to be paid again at the end of
7 months, at what rate was the interest charged?

7. Find the interest deducted-in-advance and the proceeds of a P10, 000 bank discount note
with an interest rate in advance of 12 % and he term of the loan from March 4, 2007 to
June 4, 2007.

8. If you borrow P35, 500 from a bank for two years and five months at 10 4/5 % simple
discount rate, how much will you receive from the bank?

9. In applying for 9-month loan of P45, 000, a borrower received P36, 000 as the
proceeds. What was the discount rate of the creditor?

10. Ola received P16, 600 from his P18, 500- loan. Financing company charged 10 2/5 %
simple discount, what was the term of the loan?

13
Lesson 1.8 Promissory Note/ Discounting of Note

In every business transaction, especially if it involves loans, it is necessary that the

borrower gives an assurance to the creditor that the obligations and responsibilities will be settled
on the agreed time. One way of showing this is through signing a note or promissory note.

Objective: At the end of the lesson the student should be able to perform the concept of
simple discounting of notes.

A note or promissory note is a written promise signed by the maker or debtor to pay a
certain sum of money at fixed and determinable future date, either to the creditor or to the order
of a designated person.

The important features of a promissory note are the following:

1. Face Value (FV) of the note – the amount borrowed
2. Date of the note (Dn) – the date the note was written
3. Maturity Date (Md) – the promised date of payment of due date
4. Interest rate (r) – the simple interest rate
5. Lender or Payee – the person to whom payment is due
6. Maker – the borrower

The two types of notes are simple interest note and the bank discount note.

1.8.1 Simple Interest Note or Interest Bearing Note

In simple interest note, the face value is stated value on the note that corresponds to the
principal. The total amount to be paid refers to the maturity value (F) of the note while the date
on which the total amount is due is called the maturity date. The note specified the rate of
interest.

An example of the simple interest note.

San Jose, Occidental Mindoro

July 5, 2007
P50,000
Six months after the above, the undersigned promises to pay to the order of
Mrs. Vi Ton the amount of Fifty Thousand Pesos only (P50,000) with interest at 16%.

(Signed by) Lipp See

From the note above, we can get the following

information: Maker of Note: Lipp See

Payee: Mrs. Vi Ton
Face Value: P50, 000
Interest Rate: 16%
Term of Note: 6 months
Origin Date: January 5, 2007
Maturity Date: January 5, 2008

1.8.2 Bank Discount Note or Non-Interest

The bank discount note is another type of promissory note. Here, the amount stated on
the note is the maturity value. The money received by the borrower (maker) on the origin date is
14
proceeds. In this case, the interest charged in advance is first computed then it is subtracted from
the maturity value. The difference is the proceeds.

A sample of Bank Discount Note:

San Jose, Occidental Mindoro

July 10, 2007
P70, 000
Five months after the above date, for value received, the undersigned promised to
pay to the order of Carmen de Swerte the amount of Seventy Thousand Pesos only (P70,
000).
(Signed by) Inday Monte

The note gives the following information:

Maker/ Debtor- Inday

Monte
Lender - Carmen de Swerte
Term - 5 months
Original date - July 10,
2007 Maturity value - P70, 000
Maturity date - December 10, 2007

A promissory note is negotiable financial paper, it can be sold to a bank or lending

agency or to a person at specified discount.

When the holder of a promissory note finds himself in need of cash before the maturity
date, he may sell the note to other person or to a bank, this process is called discounting the
promissory note.

The amount at which a note brought depends on the discount rate charged by the buyer,
usually less than the maturity value.

The following are some terms to illustrate the process of discounting:

1. The beginning of term (origin date) refers to the date the notes is made.
2. Maturity date is the date the note is due as it corresponds to the end of the term.
3. The discount date is the date the note was sold or discounted.
4. The term of the note is the number of days, months or years between the
origin date and maturity date.
5. The term of discount refers to the time in most cases, the number of days
between the discount date and the maturity date.

Example 1. Lenor holds a note for P17, 000 which is due 130 days with interest rate 17%.
How much is the proceeds from the note if it is discounted immediately at the
bank that charges 8% discount?

Given: P = P17, 000 r = 17% d = 8% t = 130 days

Solution:
Find: Pr = ?
a.) F = P (1 + rt)
= P17, 000 (1 + (.17) (130/360))
= P17, 000 (1.061388888)
F = P18, 043. 61
15
 Since the note is immediately discounted, so the term of discount is equal to the term of
the note.
b.) D = Fdt
= P18, 043. 61 x .08
x130/360 D = P521. 26

c.) Pr =F–D
= P18, 043. 61 – P521. 26
Pr = P17, 522. 35

Example 2. After 120 days, Lenie will pay Rona P16, 500 with interest rate at 14%. Seventy
days after the date of the note. Nico discounted the note at 17%. How much
money would Rona get from Nico?

Given: P = P16, 500 r = 14% or .14 d= .17 t = 120 days

Solution:
a.) F = P (1 + rt)
= P16, 500 (1 + (.14) (120/360))
= P16, 500 (1. 00466666666)
F = P17, 270

b.) Term of discount: 120 days – 70 days = 50 days

c.) Proceeds (P) = F (1 + dt)

= P17, 270 (1 – (.17) (50/ 350))
= P17, 270 (.976388888)
P = P16, 862. 24

Example 3. Mr. Yesso promised to pay a note dated May 6, 2007 after 150 days thereof of
P18, 500 at an interest rate at 12. 5 %. On July 8, 2007 Mr Yesso sold the note
and was discounted 14% discount interest. Find the proceeds.

Given: P = P18, 500 r = 12.5 % d = 14%

Origin date = May 6, 2007
t𝑛 =150 days
Date of discount = July 8, 2007
a.) F= P (1 + dt)
= P18, 500 (1 + (.125) (150/360))
= P18, 500 (1.052083333)
F= P19, 463. 54

b.) Maturity date:

Origin date – May 6, 2007 = 126
t𝑛 =150
276 days = October 3, 2007

c.) Term of discount:

October 3, 2007 = 276
July 8, 2007 = 189
87 days
d.) P = F (1 - dt)
= P19, 463. 54 (1 – (.14) (87/360))
= P19, 463. 54 (1 - .033833333)
= P19, 463. 54 (.966166666)
P = P18, 805. 02

16
Example 4. Find the proceeds of a note for P30, 000 payable 4 months after April 16, 2007
and discount in a bank on June 10, 2007 at 13.8%.

Given: F = P30, 000 d = 13.8% Origin date = April 16, 2007

t𝑛 = 4 months
Date of discount = June 10, 2007

a.) Maturity date: August 16, 2007 (4 months after April 16, 2007)
b.) Term of discount:
Md = August 16, 2007 = 228
D𝑑 = June 10, 2007 = 161
67 days
c.) P = F (1 - dt)
= P30, 000 (1 – (.138) (67/ 360))
= P30, 000 (1 - .02683333)
= P30, 000 (.974316666)
P = P29, 229. 50

Example 5. Bonna received a 60- days P60, 000 bank discount note on May 5, 2007, how
much did Bonna received if the note was discounted at 9% fifteen days later?

Given: f = P60, 000 t𝑛 =60 days d = 9%

Origin date = May 5, 2007
a.) Maturity date:
Origin date: May 5, 2007 = 125
Term = 60
185 days – July 4, 2007
b.) Date of discount:
Origin date: May 5, 2007 =
125 15 days later = 15
140 days – May 20, 2007
c.) Term of discount:
t𝑛 = 60 days – 15 days
= 45 days (number of days before the maturity date)
d.) P = F (1 - dt)
= P60, 000 (1 - (.09) (45/360))
= P60, 000 (1 - .01125)
= P60, 000 (.98875)
P = P59, 325

17
 Exercise 1.8
Promissory Note/ Discount Note

Name: Date:
Section: Rating:

Direction: Solve the following problems. Show your complete solution.

1. Kadang signed a P30, 000 discount note at 17%, has a term of 100 days. Find

a.) The interest charged advance

b.) The proceeds

2. Mary hold a P80, 000 note at 13. 5 % simple interest for 180 days dated March 29,
2006 – five days after March 29, Marry sold the note to East Bank at 14% discount
interest. Find

a.) The note’s maturity value

b.) The proceeds

3. Miss Taberna signed two hundred sixty day- note (260 day- note) on October 27,
2006 at simple interest 15%. She needed money so she sold the note to Mr.
Mundo 135 days before the maturity date. Determine the discount rate.

4. The note was dated February 1, 2002006 which shows a P45, 000 loan. Ms. Lo
would pay Mr. Jun Co the principal and the interest at 15% simple interest, 10
months after the date of note. June 1, 2006, Mr. Co sold the note to a bank at 17.5%
simple discount. How much di Mr. Co receive from the bank?

5. The note Mrs. Bessy was discounted at 12% after the date of the note was issued.
Determine the amount on the maturity date if the proceeds were P65, 000.

6. Find the proceeds of a note P50, 000 payable 5 months after March 15, 2007 and
discounted at a bank on May 12, 2007 at 13 ¾ %.

7. Find the maturity value of the note if the proceeds were P250, 000 and
was discounted at 12% for 8 years.

8. Kai holds a P45,000 note at 12.75% simple interest payable in a year from Mar Mart.
In need of cash Kai sold it to a person after four months. How much did she receive
if the bank charges 15%?

9. A 6-month note whose face value is P150,000 bears interest at 19%. The note is
discounted after 2 months at a bank whose discount rate is 21%. Find the
proceeds.

10. A 90-day note promises to pay P60,000 plus simple interest at 14 1/4%. It is
discounted at 13 1/3 % simple discount 25 days before maturity. What are
the maturity value of the note and the proceeds of the sale?

18
 CHAPTER II
COMPOUND
INTEREST

Lesson 2.1 Compound Interest/ Accumulation Factor Method

In business transactions covering an extended period of time, interest may be handled in

different ways. Interest may earn on top of interest. This is called Compound Interest.

Compound interest is the interest resulting from the periodic addition of simple interest
to the principal. When interest is periodically added to the principal and this new sum is used
as the new principal for a certain number of periods, the resulting value is called compound
amount and is designated by F.

Objective: At the end of the period the student should be able to solve compound interest and
compound amount by the use of accumulation factor method.

In compound interest the time between successive interest computation is called

compounding or conversion period. The number of conversion periods for one year is donated by
m, while the total number of conversion periods for the whole investment term is donated by n.
Conversion periods is usually expressed by any convenient length of time, and usually taken as
an exact division of the year, such as monthly, quarterly, semi- annually and annually. When the
conversion period is:

Annually m=1
Semi- annually m=2
Quarterly m=4
Monthly m = 12

The total number of conversion periods for the whole term can be found from the
relation: n = term x number of conversion periods per year (m)
n = tm or n = mt

The interest rate J is usually expressed or yearly rate, and must be changed to the interest
rate per conversion period rate i and can be found from the relation:

i = interest rate (J) _

conversion period
(m)
i = J/m
Note: When no conversion period is stated in any investment problem, it is assumed that
the investment is compounded annually.

The fundamental formula for compound amount is:

F = P (1 + i)n

where:
F = compound amount
P = original principal
I = interest rate per period (i = J/m)
N = total number of conversion period for the whole term

Example 1. Find the compound amount and interest on P10, 000 for 3 years at 10%
compounded annually.
Given: P = P10, 000 J = 10% t = 3 years m = 1
i = J/m i = .10/1 = .10 n = tm
= 1 (3) = 3 periods
19
Solution:
F = P (1 + i)n
= P10, 000 (1 + i. 10)3
= P10, 000 (1.10)³
= P10, 000 (1.331)
F = P13, 310

I=F–P
= P13, 310 – P10, 000
I = P3310

Example 2. Find the compound interest on P25, 000 at the end of 4 years at 12% compounded
monthly.

Given: P = P25, 000 J = 12% m = 12 t=4

years i = J/m i = .12/12 = .01 n = tm
n = 4 (12) = 48 periods
Solution:
F = P (1 + i)n
= P25, 000 (1 +. 01)48
= P25, 000 (1. 01)48
= P25, 000 (1. 612226078)
= P40, 305. 65

Example 3. Accumulate P11, 000 at 8 % compounded monthly for 5 years and 6 months.

Given: P = P11, 000 J = 8% m = 12 t = 5.5

years i = J/m i = .08/12 n = tm
= .006666667 = 5.5 x12
= .6666667% n = 66 periods
Solution:
F = P (1 + i)n
= P11, 000 (1. 06666667)66
= P11, 000 (1. 550441674)
F = P17, 054. 86

Example 4. Find the compound amount and interest on P17, 200 for 3 years and 9 months at
14% compounded quarterly.

Given: P = P17, 200 J = 14% m = t4 = 3 years& 9 months

i = J/m = 3 9/12
= .14/4 n = tm t = 3 ¾ years
i = .035 = (3.75) (4)
n= 15 periods

20
Example 5. Find the compound amount and interest on P8, 500 for 4 years and 6 months at 13%
compounded annually.

Given: P = P8, 500 J = 13% t = 4 years and 6 months

I = J/m t = 4 ½ years or 4.5 years
i = .13/2 = .065 n= tm
n= (4.5) (2) = 9 periods

Solution:
F = P (1 + i)n I=F-P
= P8, 500 1 + (1. 065)9 = P14, 981. 24331 - P8, 500
= P8, 500 (1. 76257039) I = P6, 309. 84831
F = P14, 981. 24331

21
 Exercise 2.1
Compound Interest/ Accumulation Factor Method

Name: Date:
Section: Rating:

Direction: Solve each of the following completely.

1. Find the value of the following:

a.) (1 + 1 3/4 %)25
b.) (1.0225)30
c.) (1.005833)12
d.) (1 + 1 3 / 8% )40
e.) (1 + 5%)27

2. Accumulate P15, 000 for 5 years and 9 months at 11% compounded quarterly.

3. What is the compound amount is P55, 000 is invested for 5 years at 9% compounded
quarterly?

4.
5. A man invested P8, 500 for 3 years at 11% converted semi- annually. What is the
compound amount?

6. Accumulate P13, 200 for 3 years at 12% compounded semi- annually.

7. Mrs. Jesussa Marcos borrowed P100, 000 from a cooperative for 8 years and 7
months. If the cooperative charged an interest rate at 16% compounded monthly, how
much will she repay at the end of the term.

8. If P15, 000 is deposited at 12% for 7 years, what will be the compound amount if the
interest is converted monthly?

9. Accumulate P18, 500 for 6 years

at a.) 16% simple interest
b.) 16% compounded annually

10. What is the compound amount if Mr. Manny Linggo deposited P55, 000 in a bank
which is 9% compounded quarterly for 5 years?

11. What amount of money will be required to repay a loan of P30, 000 on June 1, 2008.
If the loan was made on September 1, 2001 at the interest rate of 14% compounded
quarterly.

22
Lesson 2.2 Present Value/ Compound Discount

It is necessary to determine the present value of a certain amount due on some later date in
business transactions.

The present value is defined as the principal P which, if invested at the given term t at a
given rate J, will amount F on the date F is due.

Objective: At the end of the lesson the student should be able to solve the present value of the
compound amount due at the beginning of the term.

From compound amount formula:

F = P (1 + i)n

P can be derived for

P= F or P = F (1 + i)n
(1 + i)−n

“To discount an amount F due in n periods” means to find its present value P at n periods
before F is due.

Example 1. Find the present value of P15, 500 due in 8 years if money is worth 12% is
compounded semi- annually.

Given: P = P15, 500 J = 12% m=2 t=8

years i = J/m n= tm
i = .12/2 = .06% = 6% n= 8 (2) = 16 periods
Solution:
Find P

P = F (1 + i)n I=F–P
= P15, 500 (1 +. 06)16 = P15, 000 – P6, 101. 52
= P15, 000(1. 06)16 I = P8898. 48
= P15, 000 (.393636283)
P = P6, 101. 52

Example 2. A property purchased on installment. The buyer makes an P80, 000 down payment
and owes balance of P150, 000 in two years. Find the property’s cash value if the
money is worth 14% compounded quarterly.

Given: Cash value = down payment (if any) + present value of the installment
payment Down payment = P80, 000
Installment payment = P150, 000 in 2 years

F = P150, 000 J = 14% m=4 t = 2 years

i = J/m n=tm
i = .14/4 n= 2 (4)
i= .035 = 3.5% n= 18 periods

P = F (1 + i)n
=P150,000 (1 +. 035)8
= P150, 000 (.759411556)

23
 P = P113, 911. 73

Cash value = P80, 000 + P113, 911. 73 = 193, 911. 73

Example 3. Find the present value of P28, 500 due in 5 years if money is worth 10%
compounded quarterly.

Given: F = P28, 500 J = 10% m=4 t=5

years i = J/m n = tm
i = .10/4 = .025 n = 4(5) = 20 periods
Solution:

P = F (1 + i)n
= P28, 500 (1 +. 025)20
= P28, 500(1. 025)20
= P28, 500 (.610270942)
P = P17, 392. 72

Example 4. Discount P12, 500 for 7 years at 8% compounded annually.

Given: F = P12, 500 J = 8% m = 4 t=7

i = J/m n = tm
i = .08/1 = .08 = 8% n = 7(1) = 20 periods
Solution:

P = F (1 + i)n
= P12, 500 (1 +. 08)7
= P12, 500(1. 08)7
= P12, 500 (.583490395)
P = P7, 293. 63

Example 5. How much must be invested in a savings account to realize P19, 000 in 4 years
if money earns at the rate of 4% compounded monthly.

Given: F = P19, 000 J = 4% m = 12 t=4

years i = J/m n = tm
i = .04/12 = .003333333 = .3333333 % n = 4(12) = 48 periods
Solution:

P = F (1 + i)n
= P19, 000 (1 +. 003333333 )48
= P92, 000(1. 003333333 )48
= P19, 000 (.852370553)
P = P16, 195. 04

24
 Exercise 2.2
Present Value/Compound Discount

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Discount P125, 000 for 8 years at 9 1/2 % converted quarterly for 7 years.

2. Determine the present value of P45, 000 due at the end of 6 years with 14% interest
compounded semi- annually.

3. If money can be invested at 9% compounded quarterly, find the present value of P15,
000 due at the end of two years and nine months.

4. Discount P10, 500 for 7 years and 9 months at 7% compounded monthly.

5. A financial obligation of P30, 000 is due on February 14, 2012. What is the value of
this obligation on February 14, 2006 at 9% compounded semi- annually?

6. Find the present value of P20, 500 due at the end of 6 years and 6 months, if money is
worth 8 ½ % compounded semi- annually.

7. A computer was bought on installment – P10, 000 down payment and the balance of
P28, 000 in 2 years. What is its cash price if the interest rate is 20% compounded
quarterly?

8. How much should your parents invest today to have P950, 000 in 5 years to buy a
brand-new car 5 years from now if the money is worth 10 ½% compounded monthly.

9. If P30, 000 is due on December 2, 2011, find its present value on June 2, 2007, if
money was invested at 10% compounded semi- annually.

10. What is the present value of worth P20, 000 for 5 years at 18% compounded quarterly?

25
 COMPOUND INTEREST

Lesson 2.3 Compound Amount at a Fraction of a Period

Based on the formula in finding the compound amount:

F = P (1 + i)n

The number n is always expressed as a whole number. But there are times that the
obtained whole value for n will not result to a whole number.

Objective: At the end of the lesson the students should be able to solve compound amount at a
fraction of a period.

In finding the amount F = using the formula F = P (1 + i)n, n is assumed to be an integer.

If n is a fraction, the method of computing the compound amount is to assume compound interest
throughout the term. Simple interest is assumed over the final fractional part of a period.

This method consists of two steps:

Step 1: Find the compound amount at the end of the largest number of whole
period in the given term.
Step 2: Accumulate the result of step 1 for the remaining time (which is less than
a period) at simple interest, nominal rate.

Example 1. Find the compound amount if P10, 000 is invested for 3 years and 9 months at
12% compounded semi- annually, assuming simple interest over the final
fractional part.

Given: P = P10, 000 J = 12% m=2 t = 3 years and 9

months i = J/m n = tm
i = .12/2 = .06 = 6% n =(3 ¾ )(2) = 15/2 = 7 ½ periods
*t = n/m = 7.5/2 = 3.75 years (3 years and 9 months)

Solution:
F1 = P(1 + i)n
= P10, 000 (1 +. 06)7
= P10, 000
(1.503630259)
F1 = P15, 036. 30 F2 = P (1 + rt)
= P15, 036. 30 (1 + (.12) (3/12))
= P15, 036. 30 (1.03)
F2 = P15, 487. 39

Example 2. Accumulate P12, 200 at 13% compounded quarterly for 5 years and 5 months.

Given: P = P12, 200 J = 12% m=4 t = 5 years and 5

months i = J/m n = tm
i = .13/4 = .0325 = 3.25% n = (5 5/12) (4) = 65/3 = 21 2/3 periods

Remaining term: 2 months

*t = n/m = 21/4 = 5 ¼ years (5 years and 3 months)

26
Solution:
F1 = P(1 + i)n
= P12, 200 (1 +. 0325)21
=P12, 200 (1. 0325)21
= P12, 200 (1.957452657)
F1 = P23, 880. 92
F2 = P (1 + rt)
= P23, 880. 92 (1 + (.12) (3/12))
= P23, 880. 92 (1.03)
F2 = P23, 880. 92

Example 3. Find the compound amount and interest on P14, 800 in 4 years and 10 months
at 9% converted annually.

Given: P = P14, 800 J = 9% m = 1 t = 4 years and 10

months i = .09/1 = .06% = 9% n = mt
n = (1 )(4 10/12) = 4 5/6 = 29/6
n = (1) (29/6) = 29/6= 4 5/6 periods
Remaining term: 10 months
*t = n/m = 4/1 = 4 years

Solution:
F1 = P(1 + i)n
= P14, 800 (1 +. 09)4
=P14, 800 (1. 09)4
= P14, 800 (1.41158161)
F1 = P20, 891. 41

F2 = P (1 + rt)
= P20, 891. 41 (1 + (.09) (10/12))
= P20, 891. 41 (1.075)
F2 = P22, 458. 27

Example 4. On August 9, 2006, Miss Macatindig borrows P70, 000 and agrees to pay her
obligation on January 9, 2015, if interest is at 14% compounded quarterly. How
much will Miss Macatindig pay to discharge her obligation on January 9, 2015.

Given: P = P70, 000 J = 14% m=4 t = August 9, 2006

January 9, 2015
i = .14/4 = .035 = 3.5% = 8 years and 5
months n = (4) (101/12) = 101/3 = 33 2/3 periods = 8 5/12
Remaining months: 2 months
*t = n/m = 33/4 = 8 ¼ years (8 years and 3 months)

Solution:
F1 = P(1 + i)n
= P70, 000 (1 +. 035)33
= P70, 000(1. 035)33
= P70, 000(3.11942352)
F1 = P217, 835. 96

F2 = P (1 + rt)
=P217, 835. 96 (1 + (.14) (2/12))
=P217, 835. 96 (1.075)
F2 = P222, 918. 80
27
Example 5. Find the amount due on P50, 000 in 4 years and 4 months at 10 ½ % compounded
semi- annually

Given: P = P70, 000 J = 14% m=2 t = 4 years and 4

months i = .105/2 = .0525 = 5.25% n = tm
n = (4 4/12) 2 = 2 (13/3) = 26/3 = 8 2/3 periods
Remaining term: 4 months
*t = n/m
= 33/4 = 8 ¼ years (8 years and 3 months)

Solution:
F1 = P(1 + i)n
= P70, 000 (1 +. 035)33
=P70, 000 (1. 035)33
= P70, 000 (3.11942352)
F1= P217, 835. 96

F2 = P (1 + rt)
=P217, 835. 96 (1 + (.14) (2/12))
=P217, 835. 96 (1.075)
F2= P222, 918. 80

28
 Exercise 2.3
Compound Discount Amount at a Fraction of a Period

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Find the amount due on P45, 500 in 3 years and 8 months

at a.) 12 ¼% compounded annually
b.) 14%compounded annually
c.) 15%compounded semi- annually

2. What amount will pay a loan of P55, 000 on November 11, 2011, if the loan is made on
March 11, 2004 at a rate of 15% compounded quarterly?

3. How much will be repaid on November 27, 2007on a loan of P60, 000 made on February
27, 2006 with interest rate 12 ½ % compounded annually.

4. On April 26, 2007, Mr. Tokong borrowed P30, 500 which is to be repaid on the maturity
date. if he was charged 11 ½ % compounded semi- annually by the lender, how much
will he repay on January 27, 2015?

5. Find the compound amount and the interest on P25, 000 at 16% compounded semi-
annually in 8 years and 5 months.

6. Accumulate P14, 500 at 13% compounded quarterly for 5 years and 5 months.

7. Determine the compound amount if P90, 000 is invested in a cooperative paying

36% compounded monthly for 6 years and 6 months.

8. Teena borrowed P54, 000 at 16 ½ % compounded quarterly on January 10, 2000. How
much will she repay on October 10, 2010?

9. JC invested P170, 000 for 8 years and 10 months at 20% compounded quarterly. What
is its maturity value at the end of the term?

10. May Den borrows P43, 000 for 5 years and 3 months at 10.5 % compounded quarterly.
How much will she repay at the end of the term?

29
Lesson 2.4 Present Value at a Fraction of a Period

In a formula for the present value of compound interest P = F (1 + i)−n, the number n is
always taken as a whole number. Like the compound amount, there are some cases wherein the
obtained value n will not result to a whole number.

Objective: At the end of the lesson the students should be able to solve present value at a
fraction of a period where n is not a whole number.

The usual practice is computing the present value at a fraction of a period consists of the
following steps.
1. Increase the number of a whole period by one. Using this new period, discount F.
This means we have to add few months to complete the fractional part to one period.
2. Accumulate the result in Step 1 at simple interest, at nominal rate, for the
compounded quarterly.

Example 1. Find the present value of P25, 000 due in 3 years and 4 months at
11% compounded quarterly.

Given: F = P25, 000 J = 11% m=4 t = 3 years and 4 months

i = .11/4 = .0275 = 2.75% n = tm
n = (3 4/12) (4)
= (10/3) 4 = 40/3 = 13 1/3 periods
Additional term: 2 months
*t = n/m = 14/4 = 3.5 = 3 years and 6 months
Solution:
P1 = F(1 + i)−n
= P25, 000 (1 +. 0275)−14
=P25, 000 (1. 0275)−14
= P25, 000 (.683997276)
P1= P17, 099. 93191

P2 = P1 (1 + rt)
= P17, 099. 93191 (1 + (.11) (2/12))
= P17, 099. 93191 (1+ 018333333)
P2= P17, 413. 43066

Example 2. Discount P11, 560 for 3 years and 10 months at 6% compounded annually.

Given: F = P11, 560 J = 6% m=1 t = 3 years and 10

months i = .06/1 = .06 = 6% n = tm
n = (3 10/12) (1) = 46/12
= (23/6) (1) = 5 5/6 periods
Additional term: 2 months
*t = n/m = 4/1 =4years
Solution:
P1 = F(1 + i)−n
= P11, 560 (1 +. 06)−4
=P11, 560 (1. 06)−4
= P11, 560 (.792093663)
P1 = P9, 156. 60

P2 = P1 (1 + rt)
= P9, 156. 60 (1 + (.06) (2/12))
= P9, 156. 60 (1+ .01)
= P9, 156. 60 (1.01)
P2 = P9, 248. 17

30
Example 3. Discount P37, 200 for 4 years and 3 months at 12% compounded semi- annually.

Given: F = P37, 200 J = 12% m=2 t = 4 years and 3

months i = .12/2 = .06 = 6% n = tm
n = (17/4) (2) = 17/2 = 8 ½ periods
Additional term: 3 months
*t = n/m = 9/2 = 4.5 (4 years and 6 months)

Solution:
P1 = F(1 + i)−n
= P37, 200 (1 +. 06)−9
=P37, 200 (1. 06)−9
= P37, 200(.591898463)
P1= P22, 018. 62

P2 = P1 (1 + rt)
= P22, 018. 62 (1 + (.06) (3/12))
= P22, 018. 62 (1+ .03)
= P22, 018. 62 (1.03)
P2 = P22, 679. 18

Example 4. If money is worth 12% compounded annually, find the present value of P20, 500
due at the end of 6 years and 2 months.

Given: F = P20, 500 J = 12% m=1 t = 6 years and 2

months i = J/m n = tm
= .12/1 = .12 = 12% n = 6.16 (1)
n = 6 1/6 periods

Additional term: 10 months

*t = n/m = 7/1 = 7 years

Solution:
P1 = F(1 + i)−n
= P20, 500 (1 +. 12)−7
=P20, 500 (1. 12)−7
= P20, 500 (.452349215)
P1 = P9, 273. 16

P2 = P1 (1 + rt)
= P9, 273. 16 (1 + (.12) (10/12))
= P9, 273. 16 (1.1)
P2 = P10, 200.48

31
Example 5. If money is worth 8% converted annually, find the present value of P39, 500 due
at the end of 7 years and 7 months

Given: F = P39, 500 J = 8% m=1 t = 7 years and 7

months i = J/m n = tm
i = .08/1 = .08 n = (7 7/12) (1) = 91/12 = 7 7/12 periods

Additional term: 5 months

*t = n/m = 8/1 = 8 years

Solution:
P1 = F(1 + i)−n
= P39, 500 (1 +. 08)−8
=P39, 500(1. 08)−8
= P39, 500(.540268884)
P1 = P21, 340. 62

P2 = P1 (1 + rt)
= P21, 340. 62 (1 + (.08) (5/12))
= P21, 340. 62 (1.03333333)
P2 = P22, 051. 97
.

32
 Exercise 2.4
Present Value at a Fraction of a Period

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Discount P45, 500 for 5 years and 7 months, with interest at 12% compounded quarterly.

2. Discount P22, 000 for 7 years and 4 months, with interest at 9. 75% compounded quarterly.

3. Discount P28, 700 for 10 years and 3 months with interest at 8 ½ % compounded annually.

4. If money is worth 9% compounded semi- annually, find the present value of P40, 000
due at the end of 9 years and 9 months.

5. What sum of money will Betcha accept from her creditor on June 1, 2005 to settle a debt
of P33, 000 due on July 1, 2013, if the rate is 8% compounded semi- annually?

6. Pekwa owes Geena P34, 400 due on May 1, 2011. How much did Pekwa receive from
Geena on September 1 2006 to settle the debt if it is agreed that money is worth 11%
compounded quarterly?

7. On January 12, 2010, P55, 000 is due. What is the value of this obligation on June 12,
2006 at 8% compounded quarterly?

8. A P60, 000 is to be repaid on August 11, 2010. If it was loaned at 12% compounded
quarterly, How much loan was applied and accepted on April 11, 2006?

9. If I want to have P150, 000 in 5 years and 6 months from today. How much should I
invest in a fund paying 12% compounded every 3 months?

10. Tito borrows a certain amount of money and promised to pay P25, 500 at the end of 2
years and 3 months. If the interest is charged at 15% compounded every 6 months. How
much was borrowed?

33
Lesson 2.5 Term of the Compound Amount

The term of an investment refers to how long will certain sum of money to amount to a
certain other sum if it is invested at an interest rate.

Objective: At the end of the lesson the students should be able to specify the term of an investment.

The term of interest can be determined if the amount of investment, the principal and the
rate of interest compounded in m times per year are given.

The formula can be derived from formula for the compound amount:
F = P(1 + i)n, divide both sides of the equation by P,

F = (1 + i)n, get the logarithm of both sides of the equation.

P

log (F/P) = log (1 + i)n, by properties of logarithm,

n log (1 + i) = log F/P ; divide both side of the equation by log (1

+i) n = log F/P

log (1 + i)

Example 1. How long will it take for P22, 500 to accumulate to P40, 000 if it is invested at
15% compounded monthly?

Given: P = P22, 500 F = P40, 000 J = 15% m = 12

i = j/m
i = .15/12 = .0125 = 1.25%
Solution:
n = log F/P to solve for the term in years,
log (1 + i) *t -= n/m
= log P40, 000/ P22, 500 t = 46. 31621703
log (1 + .0125) 12
= log 1.777777778 t =3. 859684753 or 3.9 years
log 1.0125
= .249877473
.005395032
= 46.31621703

Example 2. In how many years will P28, 500 amount to P40, 634. 19 at 12%
compounded quarterly?

Given: P = P28, 500 F = P40, 634. 19 J = 12% m=4

i = J/m
i = .12/4 = .03
Solution:
n = log F/P
log (1 +
i)
= log P40, 634. 19/ P28, 500
log (1 + .03)
= log 1.425761053
log 1.03
= .154046747
.012837224
= 12. 00002703

34
 t = n/m = 12. 00002703/ 4 t = 3 years
Example 3. In what time P30, 000 amount to P38, 977. 07 at 10.75% compounded semi-
annually?

Given: P = P30, 000 F = P38, 977. 07 J = 10. 75% m=2

i = J/m
= .1075/2 = .05375 = 5.375%
Solution:
n = log F/P
log (1 + i)
= log P38, 977. 07/ P30, 000
log (1 + .05375)
= log 1. 299235667
log 1.05375
= .113687934
.022737587
= 4. 99999956

t = n/m = 4. 99999978/2 = 2. 499999978 t = 2.5 years

35
 Exercise 2.5
Term of Compound Amount

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. How long would it take P50, 000 to amount P120, 000 if invested at
15% compounded quarterly?

2. Ms. Tumangi receives a loan of P50, 000 with interest at 16% converted semi-
annually. She promised to pay the bank in full on the day when P1,200, 000 will be
due. When will Mrs. Tumangi pay the bank?

3. In how many years will P23, 000 amount to P34,278. 70 if it is invested at 9.5%
compounded quarterly?

4. Tokleng received a loan of P18, 790 with interest at 7% compounded quarterly.

She promises to pay her creditor in full on the day when P26, 583. 68 will be due.
How long will it take for Tokleng to pay the debt?

5. Find the term of an investment of P18, 250 if it increases to P20, 558. 50 if

invested at 6% compounded quarterly.

6. When is P15, 963. 47 due if its present value is P12, 475 when money is worth 9%
compounded monthly?

7. Teteng borrowed P17, 000 from Pitong with the agreement that the interest to be
charged is 12% compounded monthly. When is the loan due if the maturity value
is P30, 883. 84?

8. On February 6, 2006, Deena has P200, 000 in a fund, which earns interest at 14%
compounded quarterly. She plans to go into a business as soon as the fund contains
P346, 797. 21. On what date will the amount be available?

9. How long will it take for 10, 500 to amount P12, 762. 82 if invested at
10% compounded semi- annually?

10. If P20, 000 is invested on May 4, 2006 at 15 1/8% compounded quarterly, at what
date will it grows to P52, 505. 27?

36
Lesson 2.6 Rate of Compound Amount

There are some cases wherein we asked to determine for the interest rate. The interest
rate per conversion period can be determined when the compound amount, the term of
investment and the maturity or accumulated value are known.

Objective: At the end of the lesson the students should be able to solve the interest rate of the
compound amount.

In the formula F = P(1 + i)n, the interest rate can be determined if F, P and n are given.

From: F = P(1 + i)n

F = P(1 + i)n
P P

( F)1/n = (1 + i ) n (1/n)
P

1 + i = (F )1/n
P

i = ( F )1/n - 1
P
From: i = j/ m ; J=mi

J = m ( ( F )1/n - 1 ) x 100 %
P

Example 1. Hat annual interest rate compounded quarterly would be needed for P15, 000
` accumulate to P35, 000 in 5 years?

Given: F = P35, 000 P = P15, 000 m=4 t = 5 years

n = tm
= 4 (5) = 20 periods
Solution:
J = m ( ( F )1/n - 1 ) x 100 %
P
= 4 ( ( P35, 000)1/20 - 1 ) x 100 %
P15, 000
= 4 (1.043275093) - 1 ) x 100 %
= 4 ( .043275093) x 100 %
= .173100372 x 100%
J = 17. 31%

37
Example 2. What interest rate compounded semi- annually will P15, 000 amount to
P21, 127. 68 in 3 years?

Given: F = P21, 127. 68 P = P15, 000 m=2 t = 3 years

n = tm
= 2 (3) = 6 periods

Solution:
J = m ( ( F )1/n - 1) x 100 %
P
= 2 ( (P21, 127. 68)1/6 - 1) x 100 %
P15, 000
= 2 (1.408512 )1/6 - 1 ) x 100 %
= 2 ( .058750004) x 100 %
= .117500009 x 100%
J = 11. 75%

Example 3. What compounded quarterly will P16, 700 amount to P26, 136. 72 in 3 years and
9 months?

Given: F = P26, 136. 72 P = P16, 700 m = 4 t = 3 years and 9

months n = tm
=(3.75) (4) = 15 periods
Solution:
J = m ( ( F )1/n - 1 ) x 100 %
P
= 4 ( (P26, 136. 72)1/15 - 1) x 100 %
P16, 700
= 4 (1.565073054)1/15 - 1 ) x 100 %
= 4 ( 1.030312513) - 1 x 100 %
= 4 ( .030312513 ) x 100 %
= .121250051
J = 12.125% or 12 1/8%

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 Exercise 2.6
Rate of the Compound Amount

Name: Date:
Section: Rating:

Direction: Solve each of the following problems completely.

1. Determine the rate compounded annually if P6, 500 is the present value of P8, 000 due
in 5 years.

2. If P19, 770 is the present value of P22, 650 for 7 years and 4 months. What is the
rate compounded monthly?

3. Determine the rate compounded quarterly if P12, 122. 85 is the compound amount of
P8, 000 invested for 5 years.

4. At what rate compounded semi- annually will P19, 750 accumulate to P24, 120. 77 in
two years?

5. Upeng placed P34, 400 in an investment firm. If this amount to P58, 872. 52 after 4
years and 6 months, find the rate used if it is compounded monthly.

6. If P23, 850 amounts to P30, 247. 57 in 3 ¼ years. What is the rate of

interest compounded quarterly?

7. At what rate compounded semi- annually will P15, 300 accumulate to P21, 159. 90 in 2
years and 6 months?

8. Find the interest rate converted monthly for an amount P33, 457. 78 due in 3 years and
3 months in which the present value is P25, 000.

9. A debtor borrows P13, 500 and agrees to pay P16, 243. 28 for his debt 2 years and
3 months from now. At what rate compounded monthly is he paying the interest?

10. If P25, 000 earned an interest of P3, 000 in 2 years, at what rate compounded annually
was the money invested

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