Compound

Interest
Finding the Compound Amount

Compound interest is the interest you earn on interest.

The total accumulated amount at the end of the period, the original
principal plus the compound interest, is called Compound Amount.

Interest can be compounded:

annually m=1
semi-annually m=2
quarterly m=4
monthly m = 12

j mt
F= P 1+ I= F-P F = P (1 + r)n
m
Finding the Compound Amount

P = original principal
F = compound amount or Final to which P will accumulate
I = Compound interest
i = j/m
n = number of conversion periods for the whole term ( n = mt )
m = number of conversion periods
t = time or term of investment which is expressed in years
j = nominal rate of interest per year

j mt
F= P 1+ I= F-P F = P ( 1 + i )n
m
Compound Amount F = P ( 1 + i )n

Illustration:
1) Accumulate ₱ 15,000 for 5 years at 6% compounded quarterly.

P = ₱ 15,000 m=4 j = 6% t=5

Solution:
j .06 = .015
P = 15,000 i= =
m=4
m 4
j = .06

F=P(1+i)n
n = mt = 4 (5) = 20
= 15,000 (1.015)20

== ₱ 20,202.83
Compound Amount
Principal % F
1 15,000.00 1.015 15,225.00
2 15,225.00 1.015 15,453.38
3 15,453.38 1.015 15,685.18
4 15,685.18 1.015 15,920.45
5 15,920.45 1.015 16,159.26
6 16,159.26 1.015 16,401.65
7 16,401.65 1.015 16,647.67
8 16,647.67 1.015 16,897.39
9 16,897.39 1.015 17,150.85 F = P ( 1 + i )n
10 17,150.85 1.015 17,408.11
11 17,408.11 1.015 17,669.23
12 17,669.23 1.015 17,934.27
13 17,934.27 1.015 18,203.29
14 18,203.29 1.015 18,476.34
15 18,476.34 1.015 18,753.48
16 18,753.48 1.015 19,034.78
17 19,034.78 1.015 19,320.30
18 19,320.30 1.015 19,610.11
19 19,610.11 1.015 19,904.26
20 19,904.26 1.015 20,202.83
Compound Amount F = P ( 1 + i )n

Illustration:
2) Grace and Donna deposited ₱ 8,000 in a savings account at 5%.
If interest is compounded monthly, what will be the amount of their
deposit be at the end of two years?
Compound Amount F = P ( 1 + i )n

Illustration:
2) Grace and Donna deposited ₱ 8,000 in a savings account at 5%.
If interest is compounded monthly, what will be the amount of their
deposit at the end of two years?

P = ₱ 8,000 m = 12 j = 5% t=2

Solution:
j .05
F=P(1+i)n i= = = .004166..
m 12
= 8,000 (1.004166..)24
n = mt = 12(2) = 24
= ₱ 8,839.53
Compound Amount
Principal % F
1 8,000.00 1.00417 8,033.33
2 8,033.33 1.00417 8,066.81
3 8,066.81 1.00417 8,100.42
4 8,100.42 1.00417 8,134.17
5 8,134.17 1.00417 8,168.06
6 8,168.06 1.00417 8,202.09
7 8,202.09 1.00417 8,236.27
8 8,236.27 1.00417 8,270.59
9 8,270.59 1.00417 8,305.05
10 8,305.05 1.00417 8,339.65
11 8,339.65 1.00417 8,374.40 F = P ( 1 + i )n
12 8,374.40 1.00417 8,409.30
13 8,409.30 1.00417 8,444.33
14 8,444.33 1.00417 8,479.52
15 8,479.52 1.00417 8,514.85
16 8,514.85 1.00417 8,550.33
17 8,550.33 1.00417 8,585.95
18 8,585.95 1.00417 8,621.73
19 8,621.73 1.00417 8,657.65
20 8,657.65 1.00417 8,693.73
21 8,693.73 1.00417 8,729.95
22 8,729.95 1.00417 8,766.33
23 8,766.33 1.00417 8,802.85
24 8,802.85 1.00417 8,839.53