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RIGHTEOUSNESS AND EXCELLENCE

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GRADE 11

GRADE 11

GENERAL MATHEMATICS
MODULE

QUARTER 2 WEEK 2

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 MOST ESSENTIAL LEARNING COMPETENCY

 Define compound interest

 Illustrate compound interest
 Distinguish between simple and compound interest
 Compute interest, maturity value, future value, and present value in
compound interest environment
 Solve problems involving compound interest

I. INTRODUCTION

A. Overview

Compound interest is the addition of to the of a loan or deposit, or in other

words, interest on interest. It is the result of reinvesting interest, rather than
paying it out, so that interest in the next period is then earned on the principal
sum plus previously accumulated interest. Compound interest is standard
in and Compound interest is contrasted with where previously accumulated
interest is not added to the principal amount of the current period, so there is
no compounding. The simple annual interest rate is the interest amount per
period, multiplied by the number of periods per year. The simple annual
interest rate is also known as the (not to be confused with which goes by the
same name).

B. Objectives
At the end of this module learner, 75% of the students will be able to;

 define 'interest'
 distinguish between simple and compound interest
 apply the formula to calculate compound interest

C. Topic Outline
 Compound Interest

II. PRE-TEST

A. Complete the table below showing the amount needed in any one of the
first five years to pay off a loan of ₱20, 000.00 at 8% per year at simple
interest.

Accumulated
At the end of Principal Amount due
Interest
1 year ₱20, 000.00 ₱1, 600.00 ₱21, 600.00
2 years
3 years
4 years
5 years

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 B. Solve the following.

6. ₱10 000.00 at 6% compounded annually for 5 years.

7. ₱35 000.00 at 10% compounded semi-annually for 6years.
1
8. ₱61 000.00 at 4 2 % compounded quarterly for 4 years.
3
9. ₱18 500.00 at 7 4 % compounded semi-annually for 15 years.

10. ₱182 000.00 at 15% compounded daily for 10 years.

III. LEARNING ACTIVITIES

Compound Interest

Compound interest refers to interest payments that are made on the sum
of the original principal. ... An easier way to think of compound interest is that is it
“interest on interest,” where the amount of the interest payment is based on
changes in each period, rather than being fixed at the original principal amount.

For example, ₱40, 000.00 at 6% simple interest was loaned for a period of 3
years with interest compounded annually. Banks pay compound interest on their
savings accounts.

When the interest due at the end of a certain period is added to the principal and
that sum earns interest for the next period, the interest paid is called compound
interest.

The example can be answered as shown in the following table:

Principal at the Amount

Interest
start of the year (At the end of the year)
40, 000 x 0.06 x 1 = ₱40, 000.00 + ₱2, 400.00 =
1st year ₱40, 000.00
₱2, 400.00 ₱42, 400.00
42, 400 x 0.06 x 1 = ₱42, 400.00 + ₱2, 544.00 =
2nd year ₱42, 400.00
₱2, 544.00 ₱44, 944.00
44, 944 x 0.06 x 1 = ₱44, 944.00 + ₱2, 696.64 =
3rd year ₱44, 944.00
₱2, 696.64 ₱47, 640.64

The amount (A) at the end of the year is equal to the sum of the principal (P) and
the interest (Pr) for that year. In symbol,

A = P + Pr = P (1 + r)

In general, when interest is compounded annually for n years, the amount (or
future value) A is

𝐴 = 𝑃(1 + 𝑟)𝑡

Note: Because interest is paid on interest, compounded interest is always

greater than simple interest.

Example 1:

Find the compound amount on deposit at the end of 1 year if ₱20, 000.00
is deposited at 4% compounded (a) annually and (b) semi-annually.

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 Solution:

a. Using the formula 𝐴 = 𝑃(1 + 𝑟)𝑡 where P = ₱20, 000.00, r = 4% = 0.04, and t = 1,
we have

A = 20, 000 (1 + 0.04) = ₱20, 800.00

b. A rate of 4% per year compounded semi-annually means a rate of 2% per half

year.

Principal Interest Amount ( At the end of the

year)
1st half year ₱20, 000.00 20, 000 x 0.04 x
1
= ₱20, 000.00 + ₱400.00 =
2 ₱20, 400.00
₱400.00
2nd half year ₱20, 400.00 20, 400 x 0.04 x
1
= ₱20, 400.00 + ₱408.00 =
2 ₱20, 808.00
₱408.00

At the end of 1 year, the amount of deposit is ₱20, 808.00

In example 1b, the period (interval for compounding) is 6 months. There

𝑟
are two periods per year: the rate is per period, and the number of periods in n
2
years is 2n. Thus, if the interest is compounded semi-annually for n years, the
𝑟
amount A is 𝐴 = 𝑃(1 + 2)2𝑡
In the same way, if interest is compounded quarterly, the rate per period is
𝑟
and there are 4n periods in n years. In symbols, the compound amount is
4
𝑟
𝐴 = 𝑃(1 + 4)4𝑡
In general, the pattern can be extended for compounding K times per year
𝑟 𝑟
to get 𝐴 = 𝑃(1 + 𝐾)𝐾𝑡 , where is called the periodic rate.
𝐾

Example 2:

Identify the interest rate per compounding period and the number of
compounding periods for each of the following investments.

a.12% compounded monthly for 4 years

b. 10.2% compounded quarterly for 9 quarters
Solution:
𝑟 0.12
a. r = 12% = 0.12 and k = 12 (monthly per year), then = = 0.01. The number
12 12
of compounding periods is 12t = 12 x 4 = 48.

𝑟 0.102
b. r = 10.2% = 0.102 and k = 4 (quarter per year), then = = 0.026. The
4 4
number of compounding periods is 4t = 4 x 9 = 36.

Example 3:

If ₱320 000.00 is invested for 5 years at 8% compounded quarterly, find

(a) the compound amount and (b) the compound interest.

Solution:
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 𝑟 0.08
a. r = 8% = 0.08 and k = 4. Then = = 0.02. The number of compounding
4 4
periods is 4t = 4(5) = 20.
𝑟
𝐴 = 𝑃(1 + 4)4𝑡 = 320 000(1 + 0.02)4(5) = 320 000(1.02)20 = ₱475 503.17

The amount is ₱475 503.17.

b. Compound Interest = Compound Amount – Principal

= 475 503.17 – 320 000.00 = ₱155 503.17
Example 4:

Determine the amount of money that will be accumulated if a principal of

₱100, 000 is invested at an annual rate of 8% compounded for 10 years:

a. yearly b. semi-annually c. monthly

Solution:
a. Use the compound interest formula with P = 100, 000, r = 0.08, n = 1, and t = 10.
0.08 1(10)
𝐴 = 100, 000(1 + ) = 100, 000(1.08)10 = 215, 892.50
1

There would be ₱215, 892.50 after 10 years.

b. Use the compound interest formula with P = 100, 000, r = 0.08, n = 2, and t = 10.
0.08 2(10)
𝐴 = 100, 000(1 + ) = 100, 000(1.04)20 = 219, 112.31
2

There would be ₱219, 112.31 after 10 years.

c. Same procedure but this time n = 12.

0.08 12(10)
𝐴 = 100, 000(1 + ) = 100, 000(1.007)120 = 230, 959.84
12

There would be ₱230, 959.84 after 10 years.

Example 5:
What amount must be invested in order to have ₱128, 376.52 after
8 years if money is worth 6% compounded semi-annually?

Solution: We need to find the principal (P), knowing that the compound amount
is

A = ₱128, 376.52, r = 6% = 0.06, K = 2, and t = 8.

𝑟
𝐴 = 𝑃(1 + )𝐾𝑡
𝐾
𝐴
𝑃= 𝑟
𝑃(1 + 𝐾)𝐾𝑡

128 376.52
𝑃= 0.06 2(8)
𝑃(1 + )
2

128 376.52
𝑃=
(1.03)16
5
P = 80 000.003 or ₱80 000.00
IV. GENERALIZATION

Compound interest
refers to interest payments that are made on the sum of the original
principal. ... An easier way to think of compound interest is that is it
“interest on interest,” where the amount of the interest payment is based on
changes in each period, rather than being fixed at the original principal amount.

The amount (A) at the end of the year is equal to the sum of the principal (P) and
the interest (Pr) for that year. In symbol,

A = P + Pr = P (1 + r)

In general, when interest is compounded annually for n years, the amount (or
future value) A is

𝐴 = 𝑃(1 + 𝑟)𝑡

If the interest is compounded semi-annually for n years, the amount A is

𝑟
𝐴 = 𝑃(1 + 2)2𝑡

In the same way, if interest is compounded quarterly, the rate per period is
𝑟
and there are 4n periods in n years. In symbols, the compound amount is
4

𝑟
𝐴 = 𝑃(1 + 4)4𝑡

In general, the pattern can be extended for compounding K times per year
𝑟 𝑟
to get 𝐴 = 𝑃(1 + 𝐾)𝐾𝑡 , where is called the periodic rate.
𝐾

V. ASSESSMENT

A. Find the periodic rate if the rate is compounded (a) annually, (b)
quarterly.
B.
Annually Quarterly
1. 10%
2. 8%
3. 12%
4. 11%
5. 15%

B. Solve the following.

6. ₱30 000.00 at 8% compounded annually for 10 years.
7. ₱35 000.00 at 6% compounded semi-annually for 12 years.
1
8. ₱51 000.00 at 8 2 % compounded quarterly for 4 years.
3
9. ₱12 500.00 at 7 4 % compounded semi-annually for 12 years.

10. ₱152 000.00 at 9% compounded daily for 10 years.

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Name Date

Grade &
GRADE 11 - Teacher
Section

Learning Activity Sheet

Subject/ Learning Area: GENERAL MATHEMATICS

Activity 2: COMPOUND INTEREST

Compound interest refers to interest payments that are made on the

sum of the original principal. ... An easier way to think of compound
interest isthat is it “interest on interest,” where the amount of
the interest payment is based on changes in each period, rather than being fixed
at the original principal amount.

Objectives:
 Define compound interest
 Illustrate compound interest
 Distinguish between simple and compound interest
 Compute interest, maturity value, future value, and present value in
compound interest environment
 Solve problems involving compound interest
MELC:
 Define compound interest
 Illustrate compound interest
 Distinguish between simple and compound interest
 Compute interest, maturity value, future value, and present value in
compound interest environment
 Solve problems involving compound interest

Activities:
Answer the following involving compound interest.

A. Lauro deposited ₱64 600.00 in saving accounts which pay 8% interest

compounded semi-annually. What will his balance be in 4 years?

B. Glenda deposits₱5 000.00 in a savings account which pays 5% compounded

annually. The money is left for 3 years. Find the account balance at the end of 3
years.

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 C.Complete the table to find the compound amount of ₱50 000.00 invested at 10%
interest.

In 1 year In 5 years In 10 years

a. Compounded Annually
b. Compounded semi-annually
c. Compounded quarterly
d. Compounded monthly
e. Compounded daily

Teacher`s Remarks/ Comments:

____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________

Checked by:
_____________________________
Teacher`s Signature

Date: __________________________

VI. REFERENCES

Oronce, Orlando A., 2016, GENERAL MATHEMATICS

Prepared by:
Victorino O. Alahid
SHS Mathematics Teacher
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