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GROUP
THREE

Compound Interest
OBJECTIVES:
1. Define a compound Interest;
2. Compute Maturity (Future) Value and the
compound interest.

COMPOUND INTEREST

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1
What is compound interest?
Compound Interest (or compounding interest) is
interest calculated on the initial principal, which
also include all of the accumulated interest of
previous periods of a deposit or loan. Thought to
have originated in 17th century Italy, compound
interest can be thought of as “interest of interest”,
and will make a sum grow at a faster rate than
simple interest, which is calculated only on the
principal amount.

GENMATH Part 1
2
Compound Interest
Formula
Compound Interest Formula The mathematical formula for
calculating compound interest depends on several factors. These
factors include the amount of money deposited called the principal,
the annual interest rate (in decimal form), the number of times the
money is compounded per year, and the number of years the money
is left in the bank.

GENMATH Part 2
 Future Value

3
The future value formula of compound interest is: r = rate of
interest (in decimals, divide the given percentage by 100) The
value of n depends on the number of times the amount is
compounding. n = 1, if the amount is compounded yearly. n = 2,
if the amount is compounded half-yearly.

Future value is the value of an asset at a specific date.[1] It

measures the nominal future sum of money that a given sum of
money is "worth" at a specified time in the future assuming a
certain interest rate, or more generally, rate of return; it is the
present value multiplied by the accumulation function.[2] The
value does not include corrections for inflation or other factors
that affect the true value of money in the future. This is used in
time value of money calculations.

GENMATH Part 3
 PRESENT

4
VALUE
Present Value is the current value of a future sum of
money or stream of cash flows given a specified rate of
return.

In economics and finance, present value (PV), also

known as present discounted value, is the value of an
expected income stream determined as of the date of
valuation. The present value is usually less than the
future value because money has interest-earning
potential, a characteristic referred to as the
time value of money, except during times of zero- or
negative interest rates, when the present value will be
equal or more than the future value.

GENMATH Part 4
5
TITLE
The quick brown fox jumps over the lazy dog. The quick brown
fox jumps over the lazy dog. The quick brown fox jumps over
the lazy dog. The quick brown fox jumps over the lazy dog.
The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog. The quick brown
fox jumps over the lazy dog. The quick brown fox jumps over
the lazy dog. The quick brown fox jumps over the lazy dog.
The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog. The quick brown
fox jumps over the lazy dog. The quick brown fox jumps over
the lazy dog. The quick brown fox jumps over the lazy dog.
The quick brown fox jumps over the lazy dog.

SUB TOPIC Part 5

GROUP
THREE

Summary / Info Summary / Info Summary / Info

Fact ~ Fact ~ Facts Fact ~ Fact ~ Facts Fact ~ Fact ~ Facts

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GROUP THREE

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