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Compounded - Earning Is Added To The Principal at Regular Intervals & The Sum Becomes The

This document discusses compound interest, which is interest earned on both the principal amount and previous interest earned. Compound interest is calculated at regular intervals, such as annually, semi-annually, quarterly, or monthly. The formula to calculate compound interest takes into account the principal amount, interest rate, number of compounding periods, and number of years. Examples are provided to demonstrate how to use the formula to calculate compound interest earned in various scenarios.

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Nina Anjela Del Rosario
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26 views

Compounded - Earning Is Added To The Principal at Regular Intervals & The Sum Becomes The

This document discusses compound interest, which is interest earned on both the principal amount and previous interest earned. Compound interest is calculated at regular intervals, such as annually, semi-annually, quarterly, or monthly. The formula to calculate compound interest takes into account the principal amount, interest rate, number of compounding periods, and number of years. Examples are provided to demonstrate how to use the formula to calculate compound interest earned in various scenarios.

Uploaded by

Nina Anjela Del Rosario
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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COMPOUND INTEREST

Compounded
- earning is added to
the principal at
regular intervals &
the sum becomes the
new principal.
Compound amount
- final amount
Compound interest
- difference between
the compound
amount and the
original principal.
NOTE: The interest
may be compounded
annually, semi-
annually, quarterly,
or monthly.
COMPOUND
INTEREST FORMULA
Different from simple
interest, the
compound interest
has conversion
periods in a year, that
is:
- annually (m=1)
- semi-annually (m=2)
- quarterly (m=4)
- monthly (m=12)
The converted rate
will be denoted by i.
𝑛
𝐹 = 𝑃 (1 + 𝑖 )
𝑟
where i =
𝑚
r = annual
interest rate
𝑛 = 𝑚𝑡
t = no. of years
EXAMPLE 1:
How much interest
will Php 70 000 earn
for 1 2 years if invested
1

at 8% compounded
semi-annually?
EXAMPLE 2:
Lina deposited Php 1
500 in a bank with
12% interest
compounded
quarterly. How much
will she have in her
account at the end of
one year?
SW:
1. Mr. Fernando
wants to have Php 40
000 in his account by
the end of 3 years.
How much should he
invest today in the
bank paying 8.5%
interest compounded
semi-annually?
2. Harlene deposited
Php 5 000 in a bank
paying 12%
compounded
quarterly. After 4
years and 5 months,
she decided to close
her account. How
much money would
she able to get from
the bank?
CONTINUOUS
COMPOUNDING
Interest compounded
daily
𝑟𝑡
𝐹 = 𝑃𝑒
EXAMPLE:
Dorina would like to
have Php 5 000 one
year from today. How
much should she
deposit in a savings
bank paying 10%
converted daily?

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