LESSON 26

COMPOUNDING MORE THAN

ONCE A YEAR
GENERAL MATHEMATICS
 PRAYER
Dear God, May we, through your
blessings, † ADD purity to the world, –
SUBTRACT evil from our lives, ×
MULTIPLY Your Good News, and ÷
DIVIDE Your gifts and share them with
others.
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 QUOTE OF THE LESSON

Mathematics is like love; a

simple idea, but it can get
complicated

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 COMPOUNDING MORE THAN
ONCE A YEAR
So in the past lesson we learned
about compound interest is when
interest is calculated on the initial
principal and also on the
accumulated interest from previous
periods.

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 LETS GOO
Now we are going to learn how to solve if it's
compounding more than once a year.

When compounding more than once a year, you use the

formula:

A = P(1 + r/n)^(nt)

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 LEGENDS
A is the future value of the investment/loan, including
interest.
P is the principal investment amount (the initial
deposit or loan amount).
r is the annual interest rate (in decimal).
n is the number of times that interest is compounded
per unit.
t is the time the money is invested for, in years.
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 EXAMPLE
Let's say you have $5000 to invest in a savings account
that offers an annual interest rate of 4%, compounded
quarterly. You want to know how much money you'll
have after 3 year

using the formula we can find the answer

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 EXAMPLE
P = $5000 (the principal)
r = 4% or 0.04 (annual interest rate in
decimal)
n = 4 (since interest is compounded quarterly)
t = 3 years

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 EXAMPLE
A = 5000(1 + 0.04/4)^(4*3)
First, calculate 0.04/4:0.04/4 = 0.01
Then, calculate (1 + 0.01):1 + 0.01 = 1.01
Now, calculate (1.01)^(4×3):(1.01)^(4×3) ≈
1.12551
Finally, multiply by the principal:A ≈ 5000 ×
1.12551
A ≈ $5627.55 Fauget University | 2024
 EXAMPLE
So, after 3 years of investing $5000 in a savings
account with a 4% annual interest rate
compounded quarterly, you would have
approximately $5627.55.

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 PRACTICE QUESTIONS
1 A loan of $5000 is taken at an annual
interest rate of 8%, compounded quarterly.
What will be the total amount owed after 2
years?
2 if you deposit $3000 into a savings account
that pays an annual interest rate of 4.5%,
compounded monthly, how much money will
you have after 7 years?
 PRACTICE QUESTIONS
A = 3000(1 + 0.045/12)^(12*7)
First, calculate 0.045/12:0.045/12 ≈ 0.00375
Then, calculate (1 + 0.00375):1 + 0.00375 =
1.00375
Now, calculate (1.00375)^(12*7):
(1.00375)^(12*7) ≈ 1.358
Finally, multiply by the principal:A ≈ 3000 * 1.358
A ≈ $4,075.18
 Fauget University | 2024

THANK YOU
Presented By : Basister John Lorenz