Finding Interest Rate and Time

in Compound Interest
 Reporters

Scyrish JF Hanna Kyla

 RECALL
The amount of money borrowed
or invested on the origin date
Principal (P)
The amount after t years, that the
lender receives from the borrower
on the maturity value
Maturity value or future
value (F)
i m Nominal Rate

m Frequency of conversion

j Rate of interest each

conversion
Total number of
n conversion period
It is the exponent or power to

which a base must be raised to

yield a given number

Logarithm
 FORMULAS
Compounding more than once a
F=P(1+j) t
year
The rate for each conversion period
j=i /m
m
(j)
Total number of conversion period
n=mt
(n)
LESSON OUTLINE
1. Interest and time in compound
interest
2. Equivalent interest rate
Example 1:
How long will it take 3,000php to
accumulate to 3,500php in a bank
savings account at 0.25%
compounded monthly?
P = 3,000
F = 3,500
i(m) = 0.25% or 0.0025
m = 12
Example 2:
How long will it take 1,000php to
earn 300php if the interest is 12%
compounded semi-annually?
CAUTION
The value of n, which refers to the number
of periods, should be a whole number.
Thus, in the previous example, we used
n=5 rather than n=4.503 to compute for t.
Example 3:
At what nominal rate compounded
semi-annually will 10,000php
accumulate to 15,000php in 10 years?

F = 15,000
P = 10,000
t = 10
m=2
Example 4:
At what interest rate compounded
quarterly will money double itself in
10 years?
 Definition of terms

Equivalent rates - two

annual rates with different
conversion periods that will
earn the same compound
amount at the end of a given
number of years.
 Definition of terms

Nominal rate - annual

interest rate (may be
compounded more than
once a year)
 Definition of terms

Effective rate - the rate

compounded annually that
will give the same
compound amount as a
given nominal rate; denoted
by i(i)
Example 5:
What effective rate is equivalent to
10% compounded quarterly?

i = 0.10
m

m=4
When solving for an
equivalent rate j, six or
more decimal places are
recommended.
Example 6:
Seatwork 1:
(a) F = 2,000, P = 1,750, m = 2,
t = 4, j = ?, i(m) = ?
(b) F = 100,000, P = 10,000,
t = 8, money is compounded monthly,
i = ?, j = ?
(m)
 Seatwork 1:
(c) F = 30,000, P = 10,000,
im = 16% compounded quarterly, j = ?,
n = ?, t = ?
(d) F = 18,000, P = 12,000,
i = 12%, compounded semi-annually,
m

j = ?, n = ?, t = ?
Seatwork 2:
Seatwork 3:
(a) What is the nominal rate of interest if
P4,000 accumulates to P10,000 in 8 years with
interest
compounded quarterly?
(b) At what nominal rate compounded semi-
annually will P5000 amount to P6000 in 2
years?
(c) What rate compounded annually will
double an amount of money in 3 years?
Seatwork 3:
(d) In how many years will it take P18,000
accumulate to P20,000 when deposited in a
savings
account that earns 0.250% compounded
monthly?
(e) How long will a principal double when
invested at 10% compounded semi-annually?