Formula: A = P(1 + r/n) nt

A - Compound Amount
P - Principal
R - Annual Rate
n - Compound
t - time in years

1. P (principal) = 2,000.00
I (interest) = 81.55

A - Compound Amount
P - 2,000.00
R - 2%
n - monthly (12/yr)
t - 2 years

Formula: A = P(1 + r/n) nt

A = 2,000.00(1 + 0.02/12) (12)(2)

A = 2,000.00(1 + 0.001666667) (24)
A = 2,081.55

2. P (principal) = 12,000.00
I (interest) = 2,059.91

A - Compound Amount
P - 12,000.00
R - 4%
n - semi-annually (2/yr)
t - 4 years

Formula: A = P(1 + r/n) nt

A = 12,000.00(1 + 0.04/2) (2)(4)
A = 12,000.00(1 + 0.02) (8)
A = $14,059.91
 Formula: A = P(1 + r/n) nt

3. Formula: f = ( 1 + j / m ) ^m - 1

f = Effective Rate
j = Rate
m = Number of Times Compounded

Answer: f = ( 1 + 0.04 / 4 ) ^4 - 1

f = 0.04060401

f = 0.04060401 x 100

f = 4.060401%

4. The investment that has a higher annual yield is the one that earns 4.25%
compounded quarterly.

For the investment that earns 4% compounded monthly used on a 1,000 peso principle
representation:

P (principal) = 1,000.00
I (interest) = 40.74

Formula: A = P(1 + r/n) nt

A = 1,000.00(1 + 0.04/12) (12)(1)

A = 1,000.00(1 + 0.003333333) (12)
A = 1,040.74

For the investment that earns 4.25% compounded quarterly used on a 1,000 peso
principle example:

P (principal) = 1,000.00
I (interest) = 43.18

Formula: A = P(1 + r/n) nt

A = 1,000.00(1 + 0.0425/4) (4)(1)

A = 1,000.00(1 + 0.010625) (4)
A = 1,043.18