COMPOUND INTEREST

WHAT IS COMPOUND INTEREST?

If during the term of investment the interest due at stated intervals is added to
the principal and there after earns interest, the sum of the increase over the
principal by the end of the term of investment is called COMPOUND INTEREST.

WHAT IS COMPOUND AMOUNT?

The total amount due which consists of the principal and the compound interest
is called COMPOUND AMOUNT.

WHAT IS CONVERSION PERIOD?

The time between the successive conversions of interest into principal is called
conversion period.

It is the number of unit of time in one year as basis for computing interest which
could be either: (a) annually, (b) semiannually, (c) quarterly (d) monthly.

The above terms under the study of compound interest could be well understood
with the following presentations.

ILLUSTRATIONS 3-1

Solve for the compound amount and compound interest at the end of 2 years if
10,000 years pesos is invested at 6% compounded semiannually.