MACASA, MELANIE A.

CT MET 2T1
MMW 5/5/2022

ACTIVITY 5: MATHEMATICS OF FINANCE

You deposit P1,000 in savings account that earns 3% interest per year.
a. Copy and complete the first table (Table 1) that shows the balance of 10 years with
simple interest.
b. Copy and complete the second table (Table 2) that shows the balance after 10 years
with interest that is compounded manually.

SIMPLE INTEREST
TABLE 1
t Principal Annual Balance at
Interest End of the Year
1 $1000.00 $60 $1060
2 $1000.00 $60 $1120
3 $1000.00 $60 $1180
4 $1000.00 $60 $1240
5 $1000.00 $60 $1300
6 $1000.00 $60 $1360
7 $1000.00 $60 $1420
8 $1000.00 $60 $1480
9 $1000.00 $60 $1540
10 $1000.00 $60 $1600

COMPOUND INTEREST
TABLE 2
t Principal Annual Balance at
Interest End of the Year
1 $1000.00 $60 $1060
2 $1000.00 $60 $1123.60
3 $1000.00 $60 $1191.02
4 $1000.00 $60 $1262.48
5 $1000.00 $60 $1338.23
6 $1000.00 $60 $1418.52
7 $1000.00 $60 $1503.63
8 $1000.00 $60 $1593.85
9 $1000.00 $60 $1689.48
10 $1000.00 $60 $1790.85

c. Which type of interest give the greater balance?

Compound has the greater balance because it consist of $1790.85 while Simple only had
$1600 balance over 10 years.
d. Graph the end-of-year balance for each type of interest.
SIMPLE INTEREST:
The formula for calculating simple interest is as follows:

Formula:
I = P*r*t

P – Principal
r – rate
t – time

You deposit P1,000 in savings account that earns 3% interest per year that shows the
balance of 10 years with simple interest.

To begin, by converting R percent to r a decimal, r = R/100 = 6 percent /100 = 0.06 per

year, which is the annual rate of growth.

Using our equation, we can solve it as follows:

A = 1000 (1 + 0.06 1) = 1060 A = $1,060.00 A = $1,060.00

After one year of simple interest on a $1,000.00 principal at a rate of 6 percent per year
for one year, the total amount accrued is $1,060.00, which includes both the main and
interest.

COMPOUND INTEREST:
The formula for calculating simple interest is as follows:

Formula:
F = (1 + i) n

F – Final or Compound amount

P – Original Principal
i – Periodic Rate (i = r/m)
n – Total Number of conversions for the whole term (n-tm)
I – Compound Interest

Conversion Period Per Year:

Compound Annually (m = 1): 4x1 n=4

Compound Semi-Annually (m = 2): 4x2 n=8
Compound Quarterly (m = 4): 4x4 n = 16
Compound Monthly (m = 12): 4 x 12 n = 48
 You deposit P1,000 in savings account that earns 3% interest per year that shows the
balance after 10 years with interest that is compounded manually.

A = $1,060.00

A = P + I where
P (principal) = $1,000.00
I (interest) = $60.00

To begin, translate R as a percent to r as a decimal: r = R/100 r = 6/100 r = 0.06 rate per

year, where r = R/100 r = 6/100 r = 0.06 rate per year

Then solve the equation for A A = P(1 + r/n)nt A = 1,000.00(1 + 0.06/1)nt A = 1,000.00(1
+ 0.06/1)nt A = 1,000.00(1 + 0.06/1)nt A = 1,000.00(1 + 0.06/1)nt A = 1,000.00(1 +
0.06/1)nt

(1)(1)
A = 1,000.00 (1 + 0.06) x 1000.00 (1)
A is equal to $1,060.00.

The total amount accrued, principal plus interest, on a $1,000.00 principal at a rate of 6
percent per year compounded once per year over one year is $1,060.00. The compound
interest rate is 6 percent per year compounded once per year over one year.

e. Which graph is linear? Explain your reasoning.

Simple Interest is my answer. For a fixed rate of interest and a fixed amount of principal,
simple interest is reliant simply on the passage of time.