COMPOUN

D
INTEREST
LESSON OBJECTIVES
At the end of the lesson,
students will be able to
define and solve
problems involving
compound interest at
80% proficiency.
COMPOUND
INTEREST
is a type of interest
which results from
periodic addition of
simple interest to the
principal.
COMPOUND
INTEREST
interest is compounded
over period of time if it is
allowed to accumulate
up to the end of the
period and then added
to the original principal
to become the new
principal for the next
interest period
 COMPOUN
D AMOUNT
is the amount at the
end of the term. It is the
sum of principal and its
compound interest. To
compute the compound
amount A, we use the
formula
𝒕𝒎
 
𝒓
𝑨 = 𝑷 (𝟏 + )
𝒎
 𝒕𝒎
𝒓
 

𝑨 = 𝑷 (𝟏 + )
𝒎
 
where
P = principal
r = interest rate per year
m = frequency of conversion
t = is the length of term in years
i =
n = tm is the total number of conversion periods
 Usual values of m are
1 (annually), 2 (semiannually),
4 (quarterly), 12 (monthly) and
365 (daily).
EXAMPL
E
What is the compound amount of
350,000-peso, five-year investment
earning 5% compounded monthly?
EXAMPL
E
What is the compound amount of
350,000-peso, five-year investment
earning 5% compounded monthly?
EXAMPL
E
What is the compound amount of
350,000-peso, five-year investment
earning 5% compounded monthly?
EXAMPL
E
What is the compound amount of
350,000-peso, five-year investment
earning 5% compounded monthly?
EXAMPL
E
What is the compound amount of
350,000-peso, five-year investment
earning 5% compounded monthly?
EXAMPLE
What is the compound P = 350,000
amount of 350,000- t = 5 years
peso, five-year
r = 5% or 0.05
investment earning 5%
compounded monthly? m = 12
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound

𝒕𝒎
amount of 350,000- 𝑨 = 𝑷 (𝟏 + 𝒓 )
 

peso, five-year 𝒎
investment earning 5%
compounded monthly?
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound  𝒓 𝒕𝒎

amount of 350,000- 𝑨 =𝟑𝟓𝟎𝟎𝟎𝟎 (𝟏 + )
𝒎
peso, five-year
investment earning 5%
compounded monthly?
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound  𝟎 .𝟎𝟓 𝒕𝒎

amount of 350,000- 𝑨 =𝟑𝟓𝟎𝟎𝟎𝟎 (𝟏+ 𝒎 )

peso, five-year
investment earning 5%
compounded monthly?
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound  𝟎 .𝟎𝟓 𝒕𝒎

amount of 350,000- 𝑨 =𝟑𝟓𝟎𝟎𝟎𝟎 (𝟏+ 𝟏𝟐 )

peso, five-year
investment earning 5%
compounded monthly?
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound

( 𝟓)(𝟏𝟐)
amount of 350,000-  
𝟎 .𝟎𝟓
𝑨 =𝟑𝟓𝟎𝟎𝟎𝟎(𝟏+ )
peso, five-year 𝟏𝟐
investment earning 5%
compounded monthly?
 P = 350,000

EXAMPLE t = 5 years
r = 5% or 0.05
m = 12

What is the compound

amount of 350,000-  
449,175.5375
peso, five-year ≈ 449,175.54
investment earning 5%
compounded monthly?
EXAMPL
E
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
P
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
P r
If you deposited Php 4500 at 5% annual
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
P r
If you deposited Php 4500 at 5% annual
m
interest compounded quarterly, how
much money will be in account after 10
years?
EXAMPL
E
P r
If you deposited Php 4500 at 5% annual
m
interest compounded quarterly, how t
much money will be in account after 10
years?
EXAMPLE
𝒕𝒎
𝒓
 

𝑨 = 𝑷 (𝟏 + )
𝒎
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

𝒕𝒎
𝒓
 

𝑨 = 𝑷 (𝟏 + )
𝒎
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

𝒕𝒎
𝒓
 

𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝒎
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

𝒕𝒎
𝟎 . 𝟎𝟓
 

𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝒎
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

𝒕𝒎
𝟎 . 𝟎𝟓
 

𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝟒
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

 
(𝟏𝟎)𝒎
𝟎 . 𝟎𝟓
𝑨=𝟒𝟓𝟎𝟎 (𝟏+ )
𝟒
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

 
(𝟏𝟎) ( 𝟒)
𝟎 . 𝟎𝟓
𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝟒
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

 
(𝟏𝟎) ( 𝟒)
𝟎 . 𝟎𝟓
𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝟒
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

 
(𝟏𝟎) ( 𝟒)
𝟎 . 𝟎𝟓
𝑨 =𝟒𝟓𝟎𝟎 (𝟏+ )
𝟒
EXAMPLE
P = Php 4500
r = 5% or 0.05
m = 4 (quarterly)
t = 10 years

𝑨 =𝟕 , 𝟑𝟗𝟔 . 𝟐𝟗
 
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be able
to set aside now and invest in a fund
earning 2% per month in order for him to
reach his target amount?
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be able
to set aside now and invest in a fund
earning 2% per month in order for him to
reach his target amount?
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be
able to set aside now and invest in a
fund earning 2% per month in order for
him to reach his target amount?
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be
able to set aside now and invest in a
fund earning 2% per month in order for
him to reach his target amount?
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be
able to set aside now and invest in a
fund earning 2% per month in order for
him to reach his target amount?
EXAMPL
E
Tom needs to raise P800,000 in 18
months. What amount should he be
able to set aside now and invest in a
fund earning 2% per month in order for
him to reach his target amount?