Compound Interest

p. 27

1.4  Compound Interest

• Compound interest – a type of interest which
results from the periodic addition of simple
interest to the principal.
• This type of interest often applies to savings
accounts, loans, and credit cards.
• Compound amount – the amount at the end
of the term (after several compounding).
• It is the sum of the original principal and its
compound interest.

1.4  Compound Interest

Formula for the compound amount F:

1.4  Compound Interest

Example. Find the compound amount at the end
of 12 periods if the principal is Php25,000 and
the interest per period is 10%.

1.4  Compound Interest

Example. What is the maturity value of a
75,000-peso, three-year investment earning
5% compounded monthly?

1.4  Compound Interest

Example. Find the compound amount after 5
years and 9 months if the principal is
Php150,000 and the rate is 7% compounded
annually.

1.4  Compound Interest

More Formulas:

1.4  Compound Interest

23. Find the compound amount due in 6 years
and 2 months if Php350,000 is invested at 12%
compounded monthly.

1.4  Compound Interest

27. How much must Ella deposit in a bank that
pays 11% compounded quarterly so that she
will have Php400,000 after 4 years?

1.4  Compound Interest

28. A personal computer was bought on
installments – Php5,000 downpayment and
the balance of Php22,000 in 2 years. What is
the cash price if the interest rate is 20%
compounded quarterly? (Cash Price = down payment
+ Principal)

1.4  Compound Interest

30. On April 15, 2011, Justin borrowed Php1.4M.
He agreed to pay the principal and the interest
at 8% compounded semi-annually on July 15,
2016. How much will he pay then?

1.4  Compound Interest

33. At what rate converted quarterly will
Php30,000 become Php40,000 in 7 years?

1.4  Compound Interest

37. If Php80,000 is invested at the rate of 6 ½%
compounded annually, when will it earn
interest of Php15,000?

1.4  Compound Interest