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CompoundInterest Part1
CompoundInterest Part1
Compound Interest
• Compound interest – a type of interest which
results from the periodic addition of simple
interest to the principal
• This type of interest often applies to savings
accounts, loans, and credit cards.
• Compound amount – the amount at the end
of the term (after several compounding)
• It is the sum of the original principal and its
compound interest.
Compound Interest
• Formula for the compound amount F:
F P(1 i) n
P - original principal
j - rate
of interest per year
m - frequency of conversion
j
i - interest rate per priod; i m
Compound Interest
Example. Find the compound amount at the end
of 12 periods if the principal is Php25,000 and
the interest per period is 10%.
F P(1 i) n
25,000(1 .10) 12
F Php78,460.71
Compound Interest
Example. What is the maturity value of a
75,000-peso, three-year investment earning
5% compounded monthly?
F P(1 i) n
75,0001
36
.05
12
F Php87,110.42
Compound Interest
Example. Find the compound amount after 5
years and 9 months if the principal is
Php150,000 and the rate is 7% compounded
annually.
F P(1 i) n
9
5 12 1
150,000(1.07)
Php221,333.92
Compound Interest
More Formulas:
P F(1 i) n
1
F
j m 1
n
P
logFP
n
log(1 i)
Compound Interest
Given P = Php25,200, i = 3%, n = 16, find F.
F P(1 i) n
25,200(1.03)16
Php40,438.60
Compound Interest
Given P = Php1.8M, j = 11%, t = 7.5 years,
m = 2, find F.
F P(1 i) n
1,800,000(1.055)15
Php4,018,457.69
Compound Interest
Given F = Php46,000, j = 12%, t = 6.25 years,
m = 12, find P.
n
P F(1 i)
75
46,000(1.01)
Php21,809.96
Compound Interest
Given F = Php56,471.27, P = Php25,000,
t = 8 years 3 months, m = 4, find j.
1
1
F 56,471.27
j m 1
1
n 33
4
P 25,000
10%
Compound Interest
Given F = Php34,500, P = Php30,000,
j = 15%, m = 12, find n.
Compound Interest
Given F = Php72,157.25, P = Php48,200,
j = 9%, m = 12, find n.
logFP log72,157.25
48,200
n 54 periods
log(1 i) log(1.0075)
Compound Interest
Find the compound amount due in 6 years and 2
months if Php350,000 is invested at 12%
compounded monthly.
F P(1 i) n
350,000(1.01) 74
Php730,886.10
Compound Interest