COMPOUND

INTEREST
SIMPLE INTEREST is computed based on the original principal,
while COMPOUND INTEREST is based on occurred principal.
 COMPOUND
INTEREST
( ) [( ) ]
𝒎𝒕
𝒋 𝑨
𝟏
𝑭 =𝑷 𝟏+ 𝒓 =𝒎 𝒎𝒕
−𝟏
𝒎 𝑷
 A – Compound amount
 P – Present Value/Principal
 I – Compound interest Interest period/year m
 j – rate of interest Monthly 12

 m - # of interest per period in one year Bimonthly 6

Quarterly 4
 t – time period or term
Semi-annually 2
annually 1
1. Find the interest earned at the end of 4 years if Php36,700 is
invested at 12% compounded annually.
Given:
P = Php 36,700 j = 12% = 0.12 t = 4 years m=1

𝑰 =₱ 𝟐𝟏𝟎𝟒𝟖 .𝟏𝟔
𝑨=₱ 𝟓𝟕,𝟕𝟒𝟖.𝟏𝟔
2. What amount must be invested now in a savings account
earnings 9% compounded quarterly to accumulated a total of
Php21,000 after 5 years?
Given: r = 9% = 0.09 t = 5 years m=4 A = Php21,000
𝑨
( )
− 𝒎𝒕
𝑷= 𝒋
𝑷 = 𝑨 𝟏+
( )
𝒎𝒕
𝒋 𝒎
𝟏+
𝒎

( )
− 𝟒(𝟓)
𝟐𝟏 𝟎𝟎𝟎 𝟎 .𝟎𝟗
𝑷= 𝑷 =𝟐𝟏𝟎𝟎𝟎 𝟏+
𝟒
( )
𝟒 (𝟓 )
𝟎 .𝟎𝟗
𝟏+
𝟒
𝑷 =₱ 𝟏𝟑𝟒𝟓𝟕. 𝟏𝟓
𝑷 =₱ 𝟏𝟑𝟒𝟓𝟕. 𝟏𝟓
3. Betty paid Php 16000 for a Php 24177.10 face value having 6
years remaining until maturity. What semiannually compounded
rate of return will she earn on her investment?

[( ) ]
𝟏
Given: 𝑨
𝒓 =𝒎 𝒎𝒕
−𝟏
𝑷
P = Php 16000

[( ) ]
r=? 𝟏
𝟐𝟒 𝟏𝟕𝟕. 𝟏𝟎
t = 6 years 𝒓 =𝟐 𝟐 (𝟔)
−𝟏
𝟏𝟔 𝟎𝟎𝟎
m=2
A= Php 24177.10
𝒓 =𝟎 . 𝟎𝟕
𝒓 =𝟕 %