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    Finding Time and Rate For Compound Interest

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    Jerry Mae Ranes
    This document discusses methods for calculating compound interest rates and time periods. It provides formulas for finding the time/term for compound interest given the principal, interest rate, and future value, as well as for finding the nominal interest rate given those same factors. Several examples demonstrate using the formulas to calculate terms or rates. Key factors that determine compound interest calculations are the principal amount, interest rate, compounding periods, and future/target value.

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    Finding Time and Rate For Compound Interest

    Uploaded by

    Jerry Mae Ranes
    111 views11 pages
    This document discusses methods for calculating compound interest rates and time periods. It provides formulas for finding the time/term for compound interest given the principal, interest rate, and future value, as well as for finding the nominal interest rate given those same factors. Several examples demonstrate using the formulas to calculate terms or rates. Key factors that determine compound interest calculations are the principal amount, interest rate, compounding periods, and future/target value.

    Original Title

    05. Finding Time and Rate for Compound Interest

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    This document discusses methods for calculating compound interest rates and time periods. It provides formulas for finding the time/term for compound interest given the principal, interest rate, and future value, as well as for finding the nominal interest rate given those same factors. Several examples demonstrate using the formulas to calculate terms or rates. Key factors that determine compound interest calculations are the principal amount, interest rate, compounding periods, and future/target value.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    111 views11 pages

    Finding Time and Rate For Compound Interest

    Uploaded by

    Jerry Mae Ranes
    This document discusses methods for calculating compound interest rates and time periods. It provides formulas for finding the time/term for compound interest given the principal, interest rate, and future value, as well as for finding the nominal interest rate given those same factors. Several examples demonstrate using the formulas to calculate terms or rates. Key factors that determine compound interest calculations are the principal amount, interest rate, compounding periods, and future/target value.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 11

    FINDING INTEREST RATE

    AND TIME IN
    COMPOUND INTEREST
    LESSON OUTLINE
    1. Compute interest rate in compound interest
    2. Compute time or terms in compound interest
    FINDING THE TIME/TERM FOR
    COMPOUND INTEREST
    𝐹
    log
    𝑃
    log 1 + 𝑗
    𝑡=
    𝑚

    Where: 𝑡 = time or term


    𝐹 = maturity value
    𝑃 = principal amount
    𝑗 = rate of interest for each conversion period
    𝑚 = number of conversion periods in one year
    EXAMPLE #1
    How long will it take P3,000 pesos to accumulate to
    P3,500 in a bank savings account at 0.25%
    compounded monthly?

    Answer: Thus, payments must be made for 61.67


    years.
    EXAMPLE #2
    How long will it take P1,000 to earn P300 if the interest
    is 12% compounded semi-annually?

    Answer: It will take 2.25 years for P1,000 to earn


    P300.
    EXAMPLE #3
    How long will a principal earn 50% of this amount at 6%
    compounded quarterly?

    Answer: It will take 6.81 years for a principal amount


    earn 50% of it.
    EXAMPLE #4
    Ethan must pay P15,500 to pay an obligation of
    P12,000 at 6% compounded monthly. When should
    this payment be given?

    Answer: P15,500 must be given after 4.28 years.


    FINDING THE NOMINAL RATE FOR
    COMPOUND INTEREST
    1
    𝑚
    𝐹 𝑛
    𝑖 = −1 𝑚
    𝑃

    Where: 𝑖 𝑚 = nominal rate


    𝐹 = maturity value
    𝑃 = principal amount
    𝑚 = number of conversion periods in one year
    EXAMPLE #5
    At what nominal rate compounded semi-annually will
    P10,000 accumulate to P15,000 in 10 years?

    Answer: Hence, the nominal rate is 4.10%.


    EXAMPLE #6
    At what interest rate compounded quarterly will money
    double itself in 10 years?

    Answer: Therefore, the nominal rate that will double


    an amount of money compounded quarterly in 10
    years is 6.99%.
    EXAMPLE #7
    Shirl is planning to invest P20,000. At what rate
    compounded semi-annually will accumulate her money
    to P25,000 in 3 years?

    Answer: The money will accumulate P25,000 at


    7.58% interest rate compounded semi-annually.

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