COMPOUND INTEREST

1. Find the present worth of a future payment of P150,000 to be made in 10

years with an interest of 10% compounded quarterly.

𝐹 = 𝑃(1 + 𝑖)𝑛
. 10 4(10)
150,000 = 𝑃(1 + )
4
𝑷 = 𝐏𝟓𝟓, 𝟖𝟔𝟒. 𝟓𝟗

2. How long will it take money to double itself if invested at 8% compounded

annually?

𝐹 = 𝑃(1 + 𝑖)𝑛

2𝑃 = 𝑃(1 + .08)𝑛

𝒏 = 𝟗 𝒚𝒆𝒂𝒓𝒔

3. The amount of P75,000 was deposit in the bank earning an interest of 12%
per annum. Determine the total amount at the end of 8 years, if the principal
and interest were not withdrawn during the period?

𝐹 = 𝑃(1 + 𝑖)𝑛

𝐹 = 75,000(1 + .12)8

𝑭 = 𝐏𝟏𝟖𝟓, 𝟔𝟗𝟕. 𝟐𝟒

4. A company invest P50,000 today to be repaid in 10 years in one lump sum

at 10% compounded annually. How much profit in present day euro is
realized over 10 years?
 𝐹 = 𝑃(1 + 𝑖)𝑛

𝐹 = 50,000(1 + 0.10)10

𝐹 = P129,687.12

𝐼 =𝐹−𝑃

𝐼 = 129,687.12 − 50,000

𝑰 = 𝐏𝟕𝟗, 𝟔𝟖𝟕. 𝟏𝟐

5. A loan of P50,000 is made for a period of 15 months at a simple interest

rate of 15% . What future amount is due at the end of the loan period?

𝐹 = 𝑃 + 𝑃𝑟𝑡
. 15
𝐹 = 50,000 + 50,000 ( ) (15)
12
𝑭 = 𝐏𝟓, 𝟗𝟑𝟕. 𝟓𝟎

6. Compute the value of P100,000 5 years ago if the single payment present
worth factor is 0.74726.

𝐹 = 𝑃(1 + 𝑖)𝑛
1
= 0.74726
(1 + 𝑖)𝑛

𝑃 = 𝐹(0.74726)

𝑃 = 100,000(0.74726)

𝑷 = 𝑷𝟕𝟒, 𝟕𝟐𝟔. 𝟎𝟎
7. Find the discount if P2,000 is discounted for 6 months at 8% compounded
quarterly.

𝐹 = 𝑃(1 + 𝑖)𝑛
. 08 2
2,000 = 𝑃(1 + )
4
𝑃 = 1,922.34

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 2,000 − 1,922.34

𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕 = 𝐏𝟕𝟕. 𝟔𝟔

8. If the rate of interest is 12% compounded annually, find the equivalent rate
of interest if it is compounded quarterly.
𝑖
(1.12)1 = (1 + )4
4
𝑖 = 0.1149

𝒊 = 𝟏𝟏. 𝟒𝟗%

9. Accumulate P3,000 for 9 years at 6% compounded quarterly. Compute the

compound interest earned.

𝐹 = 𝑃(1 + 𝑖)𝑛

𝑛 = 9(4) = 36
0.06
𝑖= = 0.015
4
𝐹 = 3,000(1 + 0.015)36 = 5,129.42

𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝐹 − 𝑃

𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 5,129.42 − 3,000

 𝑪𝒐𝒎𝒑𝒐𝒖𝒏𝒅𝒆𝒅 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = 𝟐, 𝟏𝟐𝟕. 𝟒𝟐

10. Convert 12% compounded semi-annually to a rate compounded quarterly.

0.12 2 𝑖
(1 + ) = (1 + )4
2 4
𝑖 = 0.1183

𝒊 = 𝟏𝟏. 𝟖𝟑%