FINDING INTEREST RATE

AND TIME IN
COMPOUND INTEREST
 LESSON OUTLINE
1. Compute interest rate in compound interest
2. Compute time or terms in compound interest
FINDING THE TIME/TERM FOR
COMPOUND INTEREST
𝐹
log
𝑃
log 1 + 𝑗
𝑡=
𝑚

Where: 𝑡 = time or term

𝐹 = maturity value
𝑃 = principal amount
𝑗 = rate of interest for each conversion period
𝑚 = number of conversion periods in one year
 EXAMPLE #1
How long will it take P3,000 pesos to accumulate to
P3,500 in a bank savings account at 0.25%
compounded monthly?

Answer: Thus, payments must be made for 61.67

years.
 EXAMPLE #2
How long will it take P1,000 to earn P300 if the interest
is 12% compounded semi-annually?

Answer: It will take 2.25 years for P1,000 to earn

P300.
 EXAMPLE #3
How long will a principal earn 50% of this amount at 6%
compounded quarterly?

Answer: It will take 6.81 years for a principal amount

earn 50% of it.
 EXAMPLE #4
Ethan must pay P15,500 to pay an obligation of
P12,000 at 6% compounded monthly. When should
this payment be given?

Answer: P15,500 must be given after 4.28 years.

FINDING THE NOMINAL RATE FOR
COMPOUND INTEREST
1
𝑚
𝐹 𝑛
𝑖 = −1 𝑚
𝑃

Where: 𝑖 𝑚 = nominal rate

𝐹 = maturity value
𝑃 = principal amount
𝑚 = number of conversion periods in one year
 EXAMPLE #5
At what nominal rate compounded semi-annually will
P10,000 accumulate to P15,000 in 10 years?

Answer: Hence, the nominal rate is 4.10%.

 EXAMPLE #6
At what interest rate compounded quarterly will money
double itself in 10 years?

Answer: Therefore, the nominal rate that will double

an amount of money compounded quarterly in 10
years is 6.99%.
 EXAMPLE #7
Shirl is planning to invest P20,000. At what rate
compounded semi-annually will accumulate her money
to P25,000 in 3 years?

Answer: The money will accumulate P25,000 at

7.58% interest rate compounded semi-annually.