WELCOME

GRADE 11
PRAYER
WE HAVE A
ACTIVITY
RECALL
 WHAT IS
SIMPLE
INTEREST?
 WHAT IS
FORMULA OF
SIMPLE
INTEREST
 SIMPLE INTEREST OR
NOT SIMPLE INTEREST
A person deposits $5,000 in a bank
account which pays 6% simple interest
per year. Find the value of his deposit
after 4 years.
Answers
SIMPLE INTEREST
 SIMPLE INTEREST OR
NOT SIMPLE INTEREST

Allan takes a loan of Rs 10000 from a bank

for a period of 1 year. The rate of interest is
10% per annum. Find the interest and the
amount he has to pay at the end of a year.
Answers
SIMPLE INTEREST
COMPOUND
INTEREST
 WHAT IS
COMPOUND
INTEREST?
Compound interest is the interest
computed on the principal and
also on the accumulated past
interest, so compound interest is
a way to earn money because
you don’t just earn using your
original money, but also the
interest you earned.
 Maturity (Future) Value and
Compound Interest
F = P(1 + r) t
where:
P = principal or present value
F = maturity (future) value at the end of the term
r = interest rate
t = term / time in years
 Example:
Tine and Lydia each invest P10,000 for two years, but under
different schemes. Ella's earns 2% of
P10,000 the first year, which is P200, then another P200 the
second year. Thelma earns 2% of P10,000
the first year, which is P200, same as Ella's. But during the
second year, she earns 2% of the P10,000
and 2% of the P200 also.
Many bank savings accounts pay compound interest. In
this case, the interest is added to the account
at regular intervals, and the sum becomes the new basis
for computing interest. Thus, the interest
earned at a certain time interval is automatically
reinvested to yield more interest.
The following table shows the amount at the end of
each year if principal P is invested at an annual
interest rate r compounded annually. Computations
for the particular example P = P100,000 and r
= 5% are also included.
 Example 1:
Find the maturity value and the
compound interest if P10,000 is
compounded annually
at an interest rate of 2% in 5 years.
 Solution. .
Given: P = 10, 000
r = 2% = 0.02
t = 5 years

Find: (a) maturity value F

(b) compound interestIc
 Answers
The future value F is P11,040.81
and the compound interest is
P1,040.81.
 Example 2:
Find the maturity value and interest if
P50,000 is invested at 5%
compounded annually
for 8 years.
 Solution.
Given: P = 50, 000
r = 5% = 0.05
t = 8 years

Find: (a) maturity value F

(b) compound interestIc
Answers
The maturity value F is
P73,872.77 and the compound
interest is P23,872.77.
 Example 3:
Suppose your father deposited in your bank account
P10,000 at an annual interest rate
of 0.5% compounded yearly when you graduate from
kindergarten and did not get the amount until
you finish Grade 12. How much will you have in your bank
account after 12 years?
 Solution. .
Given: P = 10, 000
r = 0.5% = 0.005
t = 12 years

Find: F The future value F

Answers

The amount will become

P10,616.77 after 12 years.
The present value or principal of the maturity value F due in t
years any rate r can be obtained from
the maturity value formula F = P(1 + r)t
.
Solving for the present value P,
Present Value P at
Compound Interest
 P = principal or present value
F = maturity (future) value at the end of the term
r = interest rate
t = term / time in years
 Example 4:

What is the present value of P50,000 due in 7 years if

money is worth 10% compounded
annually?
 Solution. .
Given: F = 50, 000
r = 10% = 0.1
t = 7 years

Find: P The present value P

Answers

The present value is

P25,657.91.
SEATWORK:
Find the unknown principal P, rate r, time t,
and compound interest Ic by completing
the table.
THANK YOU
GRADE 11!!!