1. When is compound interest your friend?

- Suppose, according to the person we interviewed, you invest 100,000 pesos in a

bond that compounds interest semi-annually at a rate of 8%. After the first six
months, the interest earned would be 4,000 pesos (100,000 * 8% / 2). Reinvesting
this interest back into the bond increases your principal to 104,000 pesos. In the
subsequent six-month period, the interest earned would be 4,160 pesos (104,000 *
8% / 2).

Continuing this process over five years (10 compounding periods), the initial
investment of 100,000 pesos would grow to approximately 218,811.68 pesos.
Compound interest, as per the insights from the interviewee, allows your
investment to steadily increase. The interest earned in each period contributes to
the growth, resulting in a notable increase in the total value of your investment in
pesos.

2. When is compound interest your enemy?

- According to the person we interviewed, suppose you have a credit card with an
outstanding balance of 250,000 pesos, subject to an annual interest rate of 24%.
Making only the minimum monthly payment, which is typically calculated as 5% of
the outstanding balance, compounds the interest on the remaining unpaid balance.
In the first month, the interest accrued amounts to 5,000 pesos (250,000 * 24% /
12). If you pay only the minimum amount, let's say 12,500 pesos, the remaining
balance becomes 257,500 pesos (250,000 - 12,500 + 5,000). Consequently, the
interest for the next month will be calculated on this new amount, perpetuating the
cycle of compounding interest on the remaining debt.

Continuing this cycle, solely maintaining the minimum payments can lead to a
significant increase in the total amount owed. Over time, the debt may become
substantial due to the continual accrual of compound interest on the unpaid
balance, making it challenging to clear the debt.

CASANTUSAN, VINCENT KOBE C.

RETES, SHANE VAN L.

INDIVIDUAL REFLECTION
This activity has been enlightening, it underscored the importance of organization in one's plans and
strategies for both earning and preserving wealth. Often, decisions are made impulsively without
adequate contemplation or analysis of potential scenarios. Business mirrors a game, where victory
or defeat is possible. Compound interest isn't merely about profiting from investments, it's a
nuanced concept that requires prudent handling. According to her insights, the primary advantage
of compound interest lies in its ability to grow money more rapidly than simple interest. However,
it's crucial to bear in mind that inadequate management can lead to loss, especially when dealing
with low interest rates.