SIMPLE INTEREST AND DISCOUNT MATHEMATICS OF FINDING THE PRINCIPAL

INVESTMENT The principal amount can be determined by simply

THE NATURE OF INTEREST manipulating the basic formula.
❑Interest refers to the amount paid for the use of 𝑰
𝑷=
money or the price paid for the use of credit. 𝒓𝒕
❑This may be also viewed as INCOME – it refers to the
amount received as a result of the possession or On May 1, 2012, Hazel borrowed a sum of money from
ownership of a contractual obligation to pay on the part Community Bank, payable for 2 years at 8% simple
of another. interest. She paid P6,000 for the interest of her loan.
Given: Interest = ₱6,000 ; rate= 8% ; Time= 2 years
❑It is also treated as an EXPENSE by the user of money 6,000
or credit. 𝑃=
(0.08)(2)
❑It also serves as a mechanism for imposing a penalty
𝑃 = 37,500
on a borrower for not paying a matured financial
obligation at a specified time.  Therefore the principal of Hazel borrowed is
❑Lender or Creditor refers to the party lending money ₱37,500.
or extending credit. He/she expects to earn income
from this transaction. FINDING THE RATE
❑Borrower or debtor refers to the party lending money 𝑰
or extending credit, who expects future expenses as the 𝒓=
𝑷𝒕
cost of using it.

THE ELEMENTS OF INTEREST COMPUTATION On July 1, 2012, Izzy deposited P400,000 at Northern
The amount of interest that a lender receives or a Bank. The deposit earned a simple interest of P96,000
borrower pays is computed using the following for 3 years.
elements: Given: Principal = ₱400,000 ; Interest = ₱96,000 ;
❑Principal – refers to the amount of money extended Time= 3 years
for credit or the money deposited in the bank for 96,000
𝑟=
safekeeping. (400,000)(3)
❑Interest rate – refers to the charged amount for using 𝑟 = 0.08
the money over a certain period.
❑Time – refers to the period covered from the time  Therefore the rate of Izzy deposited is 0.08 or
that the money is borrowed until its due date. 8%.

SIMPLE INTEREST COMPUTATION FINDING THE TIME

𝑰
 Simple interest refers to an interest that is 𝒕=
computed only once from the time the amount is 𝑷𝒓
Winston borrowed P150,000 from his organization’s
borrowed until it is paid. There is only one interest
fund where he was charged with 10% simple interest.
payment made during the entire period of
He paid P30,000 as interest upon payment of the
borrowing.
principal on the maturity date.
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = 𝑷𝑹𝑻
1. On April 1, 2012, Angel borrowed P300,000 for Given: Principal = ₱150,000 ; Interest = ₱30,000 ; rate=
additional working capital from Premier Lending 10%
30,000
at 7% interest, payable in 1 year. Find the simple 𝑡=
interest. (150,000)(0.10)
Given: Principal = ₱300,000 ; rate= 7% ; Time= 1 year 𝑡=2
𝐼 = (300,000)(0.07)(1)
𝐼 = 21,000  Therefore the time of Winston borrowed is 2
years.
 Therefore the interest Angel borrowed is
₱21,000. MATURITY VALUE OR AMOUNT
This refers to the sum of the principal and
interest. It is the future value of the principal amount,
expressed in the following formula:
 𝑴= 𝑷+𝑰 the problem is expressed in number of days but the
By expanding the basic simple interest formula, the interest rate is expressed in percent per year.
maturity value is computed using the following formula:
𝑴 = 𝑷 + 𝑷𝑹𝑻 ORDINARY INTEREST METHOD
By the process of factoring, maturity value can be This method of computing interest uses 360 days in a
expressed as: year.
𝑴 = 𝑷(𝟏 + 𝒓𝒕) EXACT INTEREST METHOD
This method adopts 365 days in a year. But in a leap
Kay borrowed P12,000 which is payable after 3 years year, it uses 366 days.
and 8 months with a simple interest of 12%. Find the
maturity value. Relationship between Ordinary and Exact Interest
Given: Principal = ₱12,000 ; rate = 12% ; Time= 3 years Methods
and 8 months It is observable that one difference between
11 ordinary interest and exact methods is the denominator
𝑀 = 12,000(1 + (0.12)( )
3 used in the time element of the interest formula.
𝑀 = 17,280 Another salient difference is that the amount of simple
interest using the ordinary interest method is higher
 Therefore the maturity value of Kay borrowed is compared to exact interest method.
₱17,280. Working on the relationship between the two in
terms of days, the ratio of 360 days against 365 days is
APPROXIMATE AND ACTUAL NUMBER OF DAYS as follows:
Ratio = 360/365
 APPROXIMATE AND EXACT TIME = 0.986301:1
There are two ways of finding time between the two
dates given. These are: This means that the exact interest is 0.986301 of
❖EXACT TIME as the name implies, is the exact number the ordinary interest. Thus, if we multiply the ordinary
of days as found from a calendar. interest by 0.986301, the result will be the amount of
❖APPROXIMATE TIME is found by assuming each simple interest using the exact interest method.
month to have 30 days.
In other words, there are four (4) possible
On May 4, 2002, Mrs. Joy Mendoza borrowed P22,000 combinations to determine the simple interest between
at 10% interest. Interest and principal were due on two dates.
September 6, 2002. What was the total amount paid by 1. Ordinary Interest Method using Exact or Actual
her on that date? Time:
𝑬𝒙𝒂𝒄𝒕 𝑻𝒊𝒎𝒆
APPROXIMATE TIME 𝑰 = 𝐏𝐫( )
𝟑𝟔𝟎
September 6, 2002 2. Ordinary Interest Method using Approximate Time:
May 4, 2002 𝑨𝒑𝒑𝒓𝒐𝒑𝒙𝒊𝒎𝒂𝒕𝒆 𝑻𝒊𝒎𝒆
𝑰 = 𝐏𝐫( )
This means 4 months and 2 days. To find the number of 𝟑𝟔𝟎
days: (4 x 30 days) + 2 days = 122 days 3. Exact Interest Method using Exact Time:
𝑬𝒙𝒂𝒄𝒕 𝑻𝒊𝒎𝒆
𝑰 = 𝐏𝐫( )
ACTUAL TIME 𝟑𝟔𝟓
May 27 4. Exact Interest Method using Approximate Time:
𝑨𝒑𝒑𝒓𝒐𝒑𝒙𝒊𝒎𝒂𝒕𝒆 𝑻𝒊𝒎𝒆
June 30 𝑰 = 𝐏𝐫( )
July 31 𝟑𝟔𝟓
Note: There are four possible methods to compute
August 31
simple interest when the loan date and the maturity
September 6
date are given. In other words, under such situation, the
Total 125 days
problem should clearly specify which method to use in
computing for simple interest. However, Method 1 shall
 ORDINARY AND EXACT INTEREST METHODS
be used to compute simple interest in case the problem
Ordinary and Exact Interest Methods are two methods does not specify the method to be used. This method is
used to determine the interest when the time given in known as the Banker’s Rule.
 PRACTICE EXERCISE: EXAMPLE
On May 15, 2012, Sol borrowed P50,000 from Sol borrowed P15,000 at 12% for a term of 2 years.
Community Bank at 10% interest rate. The loan is Determine the following under simple interest and
payable on October 10, 2012. simple discount:
Simple Interest Simple Discount
Compute the simple interest using the four A. Interest
combinations. deducted in Php 0 Php 3,600
advance
1. Ordinary Interest Method using Exact or Actual B. Amount
Time: received on Php 15,000 Php 11,400
148 the loan date
𝐼 = (50,000)(. 10) ( ) = ₱ 𝟐, 𝟎𝟓𝟓. 𝟓𝟔 C. Amount
360
2. Ordinary Interest Method using Approximate Time: payable on Php 18,600 Php 15,000
145 the due date
𝐼 = (50,000)(0.10) ( ) = ₱ 𝟐, 𝟎𝟏𝟑. 𝟖𝟗 When the interest is deducted in advance, borrowing is
360
3. Exact Interest Method using Exact Time: considered to be discounted.
148 SIMPLE DISCOUNT FORMULAS
𝐼 = (50,000)(0.10) ( ) = ₱ 𝟐, 𝟎𝟐𝟏. 𝟖𝟔 𝑫 = 𝑴𝒓𝒕
366
4. Exact Interest Method using Approximate Time: where:
145 D = Discount ; M = Maturity value
𝐼 = (50,000)(0.10) ( ) = ₱ 𝟏, 𝟗𝟗𝟒. 𝟓𝟒 r = Discount rate ; t = Discount time
366
EXAMPLE
 DISCOUNT 1. Find the maturity value of P4,500 discount interest
NATURE OF DISCOUNT for the period of 8 months at 7.5%.
•Reduction from the full amount of a price or debt 𝑫 4,500
𝑴= = = ₱ 𝟗𝟎, 𝟎𝟎𝟎
•The interest deducted in advance in lending 𝒓𝒕 8
(0.075)(12)
commercial paper
•The rate of interest deducted in a lending transaction 2. The discount interest is P1,300 on P65,000,
• To deduct from a price discounted for 90 days. Find the discount rate.
𝑫 1,300
• To advance money after deducting interest 𝒓= = = 𝟎. 𝟎𝟖 𝒐𝒓 𝟖%
𝑴𝒕 90
• To reduce the value (65,000)(360)
Simple Discount 3. Find the discount time for P110,000 at 9.5%
•It refers to the difference between the future value or discount rate with discount interest of P15,675
amount due and its present value. 𝑫 15,675
•It is also equivalent to the simple interest and it is 𝒕= = = 𝟏. 𝟓 𝒚𝒆𝒂𝒓𝒔
𝑴𝒓 (110,000)(0.095)
called such because the discount is computed only once
during the entire period of borrowing. BANK DISCOUNT
• It refers to the amount of interest deducted by the
Simple Interest Simple Discount bank in advance.
Principle Present Value •When the bank discounted a loan, the borrower
Maturity Value or Amount Future Value or Amount Due receives an amount less than what was borrowed, since
Interest Discount the interest has been deducted in advance.
Interest Rate Discount Rate • It is computed as follows:
𝑩𝒂𝒏𝒌 𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕 = 𝑴𝒓𝒕
DIFFERENCE • The amount that the borrower receives is called
proceeds. It is the discounted value of the loan, and it is
 For simple interest, the borrower receives the full computed as follows:
amount on that date. On the other hand, simple 𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑴 − 𝑩𝒂𝒏𝒌 𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕
discount the borrower receives only the net 𝑾 = 𝑴(𝟏 − 𝒅𝒕)
amount; and on the due date, he/she will pay the EXAMPLE
principal in full Jon borrowed P50,000 from Community Bank at 12%
discount rate for 1 year and 6 months. Determine the
proceeds of the loan.
𝑾 = 50,000(1 − (0.12)(1.5)) = ₱𝟒𝟏, 𝟎𝟎𝟎
DETERMINING THE AMOUNT OF LOAN TO BE It refers to the selling of the note before its
DISCOUNTED maturity date. It is one way for a business or creditor to
𝑾 finance its receivable.
𝑴=
𝟏 − 𝒅𝑻 When a promissory note is discounted, the
payee sells the note to the bank and receives the
EXAMPLE proceeds at a discount. On the due date, the bank
Michelle needs P66,800 for an additional working receives the maturity value of the note, that is, the
capital. The bank is charging a discount rate of 11% for a principal plus the interest.
1 year and 6 months borrowing. How should be loaned
by Michelle? The following procedures may be observed in
66,800 discounting a promissory note:
𝑴= = ₱𝟖𝟎, 𝟎𝟎𝟎
1 − (0.11)(1.5)
1. Determine the maturity value of the note using the
PROMISSORY NOTES following formula:
• It is a written promise signed by the maker to pay 𝑴𝒂𝒕𝒖𝒓𝒊𝒕𝒚 𝑽𝒂𝒍𝒖𝒆 = 𝑷(𝟏 + 𝒓𝒕)
another person certain sum of money in a fixed or
determinable future time. 2. Determine the discount period. This refers to the
• 2 types of promissory notes are: remaining period from the date of discounting up to the
✓Simple Interest Promissory Note maturity date. In counting the remaining number of
✓Discounted Interest Promissory Note days or discount period, always remember to exclude
It may also be: the first day but include the last day.
✓Interest-bearing Note 3. Determine the discount using the following formula:
✓Non-interest bearing Note 𝑫 = 𝑴𝒅𝒕

Simple Interest Promissory Notes 4. Determine the proceeds using the following formula:
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑴 − 𝑩𝒂𝒏𝒌 𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕

EXAMPLE
On May 15, 2012, Golden Company received a
PARTS OF A PROMISSORY NOTE P120,000, 90-day, 10% simple interest-bearing note
from its customer. The company discounted the note on
❖Maker – the person who signs and executes the note
July 20, 2012 at Metro Pacific Bank at 12% discount rate.
because of borrowing
What is the proceeds of the discounting?
❖Payee – the person who extends credit or lends 1. Find the M
money 90
❖Face Value of the Note – the principal or amount 𝑴𝒂𝒕𝒖𝒓𝒊𝒕𝒚 𝑽𝒂𝒍𝒖𝒆 = 120,000(1 + (0.10) ( ))
360
borrowed = ₱𝟏𝟐𝟑, 𝟎𝟎𝟎
❖Date of the Note – the date the note is made or 2. Discount Period
signed May 16 90 days
❖Maturity Date – the due date of the note June 30 + 66 days
❖Term of the Note – the length of time covered by the July 20 24 days
note 66 days
3. Discount
PROMISSORY NOTES 24
𝑫 = (123,000)(0.12) ( ) = ₱𝟗𝟖𝟒
A promissory note may be transferred from one 360
person to another. In transferring the note, the holder 4. Proceeds
endorses it, and perfects the transfer by delivery. A 𝑷𝒓𝒐𝒄𝒆𝒆𝒅 = 123,000 − 984 = ₱𝟏𝟐𝟐, 𝟎𝟏𝟔
note that is transferred and accepted by another person
is called a NEGOTIABLE PROMISSORY NOTE DISCOUNTING OF A NON-INTEREST BEARING
PROMISSORY NOTE
DISCOUNTING OF AN INTEREST-BEARING PROMISSORY When a non-interest bearing is discounted, the
NOTE maturity value is equal to its principal.
In other words, there is no need to compute for
the maturity value; hence, the procedures are less than
1 step from that of discounting an interest- bearing On the other hand, the present value of P10,000 at a
note. discount rate of 10% for a term of 1 year and 6 months
EXAMPLE is as follows:
Lourdes borrowed P15,000 from Jean for a period of 8 𝑫 = 𝑴(𝟏 − 𝒓𝒕)
months and issued a non-interest bearing note. After 2 𝑫 = 10,000(1 − (0.10)(1.5)) = ₱𝟖, 𝟓𝟎𝟎
months, Jean sold the note to Banco Negro at 12%. Obviously, the simple interest rate of 11.7647% is equal
Determine the proceeds. to 10% discount rate for a term of 1 year and 6 months,
since they give the same present value of ₱8,500 on the
₱10,000 future amount.
RELATIONSHIP BETWEEN INTEREST RATE AND Thus, if you have a simple interest rate of 15%, it does
DISCOUNT RATE not mean that you have a discount rate of 15%.
In discounting promissory notes, two types of
interest are used: interest rate and discount rate. EFFECTIVE RATE OF INTEREST
The interest rate is the rate that appears on the It refers to the true or real interest. It is
promissory note; the discount rate is the rate used by measured based on the ratio of interest or discount over
the bank or the buyer of the promissory notes. In case, the sum of the proceeds of the borrowings and their
however, that no discount rate is provided, the interest terms.
rate is assumed to be the discount rate. In a simple interest note, the nominal rate is
In addition, the interest rate is used to compute likewise considered as the true or effective interest,
the maturity value of the promissory note. The maturity since the borrower receives the full amount of
value is the full amount that the borrower will pay on borrowings. In other words, the proceeds of the loan
the due date. On the other hand, the discount rate is are equal to the principal.
used to determine the discount and proceeds of the Whereas, in a discounted interest note, the
discounting. borrower receives only the proceeds, that is, the
difference between the maturity value and the discount.
Example: The proceeds are basically lower than the face value;
Nelly wants to know what interest rate is equivalent to a hence, the interest in a discounted note is not the true
10% discount rate if discounted for 1 year and 6 months. or effective interest rate.
She plans to extend a loan with a maturity value of The formulas to compute the effective interest rate are
P10,000. as follows:
Answer and Analysis: For simple interest note:
The problem is asking to determine what interest rate is 𝑰
𝑬𝒇𝒇𝒆𝒄𝒊𝒗𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒓𝒂𝒕𝒆 =
equal to 10% discount rate for a period of 1 year and 6 𝑷𝒕
months. For discounted interest note:
Discount rate = 10% 𝑫
𝑬𝒇𝒇𝒆𝒄𝒊𝒗𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒓𝒂𝒕𝒆 =
Time = 1 year and 6 months or 1.5 years 𝑾𝒕
The equivalent interest rate is computed as follows:
𝒓 PARTIAL PAYMENT OF NOTES
𝑹= A simple interest promissory note is sometimes
𝟏 − 𝒓𝒕
0.10 settled by the maker or holder through a series of
𝑹= = 𝟎. 𝟏𝟏𝟕𝟔𝟒𝟕 𝒐𝒓 𝟏𝟏. 𝟕𝟔𝟒𝟕%
1 − (0.10)(1.5) partial payments instead of a single payment upon
This means that a simple interest of 11.7647% is equal reaching the maturity date. In other words, the whole
to 10% discount rate for a period of 1 year and 6 amount due (maturity value) is settled by a series of
months. payments up to the due date.
Assuming that the future amount is P10,000, let us These steps may be observed:
prove that the two rates are equal based on their 1. Compute the maturity value with the entire terms of
present values. the borrowing. This is the sum of all partial payments
The present value of P10,000 at 11.7647% simple and the final payment on the due date. In other words,
interest for period of 1 year and 6 months is computed the sum of all partial payments and the final payment
as follows: should not be more than the sum of the principal and
𝑴 interest.
𝑷=
𝟏 − 𝒓𝒕 2. Deduct from the maturity value all partial payments
10,000 made and unexpired interest applicable to partial
𝑷= = ₱𝟖, 𝟓𝟎𝟎
1 − (0.117647)(1.5)
payments. The unexpired interest applicable to partial TERMS RELATED TO COMPOUNDING OF INTEREST
payment is counted from the partial payment date up to  NOMINAL RATE refers to the rate of borrowing
the due date. and is usually quoted as an annual interest rate
3. The difference between the maturity value and all unless otherwise specified.
partial payments, including the unexpired interest, is  FREQUENCY OR NUMBER OF CONVERSIONS
equal to the balance on the due date. refers to the number of times the interest is
added to the principal in a year. The number of
Example: conversion periods during a loan term is also
Thea borrowed P30,000 at 12% simple interest per known as the Compounding Period.
annum payable after 1 year. 4 months thereafter, she  PERIODIC RATE OR INTEREST RATE PER
paid P6,000 and made another partial payment of COMPOUNDING PERIOD refers to the interest
P8,000 after 10 months. rate per conversion period. It is equal to the
Required: Determine the amount due on maturity date. nominal rate divided by the compounding
Answer and analysis: The borrowing is at simple period in a year.
interest, but before the due date, the debtor made a
series of partial payments. Example
Applying the steps indicated above, the amount due on A loan with a term of 2 years will have the following
the maturity date is computed as follows: total compounding periods:
Maturity Value – P33,600 Period Frequency Term of Total
Less: the Loan Compounding
Payments and Unexpired Periods
Interest Annually 1 2 years 2
1st Partial Payment P6,000 Semi-annually 2 2 years 4
Unexpired Interest for the Quarterly 4 2 years 8
8 remaining months Monthly 12 2 years 24
(6,000 x 12% x 8/12) 480
ILLUSTRATIVE EXAMPLE
2nd Partial Payment 8,000 Julien plans to borrow a sum of money from a bank,
payable for 3 years. The bank is charging 12% interest
Unexpired Interest for the compound quarterly.
2 remaining months NOMINAL RATE OF INTEREST
(8,000 x 12% x 2/12) 160 14,640 0.12
𝑵𝒐𝒎𝒊𝒏𝒂𝒍 𝒓𝒂𝒕𝒆 𝒐𝒇 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = = 𝟎. 𝟎𝟑
4
Amount due on maturity date P18,960 TOTAL NUMBER OF CONVERSION PERIODS
𝑻𝒐𝒕𝒂𝒍 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒄𝒐𝒏𝒗𝒆𝒓𝒔𝒊𝒐𝒏 𝒑𝒆𝒓𝒊𝒐𝒅𝒔
The maturity value of the borrowing is computed only = 𝟑 𝒙 𝟒 = 𝟏𝟐
once, since the interest charged is a simple interest. PERIODIC RATE OF INTEREST
0.03
𝑷𝒆𝒓𝒊𝒐𝒅𝒊𝒄 𝒓𝒂𝒕𝒆 𝒐𝒇 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = = 𝟎. 𝟎𝟎𝟐𝟓
 COMPOUND INTEREST 12
COMPOUND AMOUNT
NATURE  It is the accumulated value of the principal and all
 It refers to the sum of interests of prior periods interest amounts of prior periods. In other words, it
computed on the original or principal amount and is the sum of the principal and all compound
each of successive periods on both the principal and interests.
interest.  In determining the compound amount, the sum of
 In computing compound interest for the first period, the interest and the principal will be the basis for
it is based on the principal. The interest due is then computing the interest of the next compounding
added to the principal for the next period, and the period. The process of adding the interest to the
sum, which serves as the new principal, is the basis principal in computing for the interest of the next
for the next interest computation until the due date. succeeding period continues up to the due date.
This is known as COMPOUNDING OF INTEREST.
𝑪 = 𝑷(𝟏 + 𝒊)𝒏
Where:
C = Compound amount ; interest for the integer and the simple interest for the
P=Principal or present value fraction.
ⅈ= Periodic interest rate ;
n= Total Number of compounding periods Rico invested P15,000 for 8 years and 7 months at 10%
Illustrative Example compounded quarterly.
1. On January 1, 2011, Louie borrowed P10,000 at 12% DIRECT SUBSTITUTION METHOD
103
compounded quarterly for 1 year. Determine the 0.10 ( 12 )(4)
compound amount and compound interest. 𝑪 = 15,000 (1 + ) = ₱𝟑𝟓, 𝟎𝟏𝟔. 𝟖𝟕
4
COMPOUD AMOUNT PRACTICAL METHOD
(1)(4)
0.12
𝑪 = 10,000 (1 + ) = ₱𝟏𝟏, 𝟐𝟓𝟓. 𝟎𝟗
4 ALTERNATIVE PROCEDURE FOR PRACTICAL METHOD
COMPOUND INTEREST Another way of determining the compound amount
𝑪𝒐𝒎𝒑𝒐𝒖𝒏𝒅 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = 11,255.09 − 10,000 with a fractional period using the practical method is to
= ₱𝟏, 𝟐𝟓𝟓. 𝟎𝟗 compute the compound amount with an integer. The
result, which is the new principal, will be the basis to
2. Jene deposited P10,000 at 15% for 5 years. compute the compound interest of the fraction using a
Determine the compound amount or future value of simple interest formula. The sum is the final compound
the deposit if the interest is compounded: amount.
7 103 1
MONTHLY 𝒏 = (8 + ) = ( ) (4) = 34
(5)(12)
12 12 3
0.15 To solve the compound amount:
𝑪 = 10,000 (1 + ) = ₱𝟐𝟏, 𝟎𝟕𝟏. 𝟖𝟏
12 𝑪 = 𝑷(𝟏 + 𝒊)𝒏
QUARTERLY 0.10 34
(5)(4) 𝐶 = 15,000 (1 + ) = ₱𝟑𝟒, 𝟕𝟐𝟗. 𝟖𝟑
0.15 4
𝑪 = 10,000 (1 + ) = ₱𝟐𝟎, 𝟖𝟖𝟏. 𝟓𝟐 To compute the simple interest:
4
SEMI-ANNUALLY 𝟏
(5)(2) 𝑰 = (𝟑𝟒, 𝟕𝟐𝟗. 𝟖𝟑)(𝟎. 𝟎𝟐𝟓) ( ) = ₱𝟐𝟖𝟗. 𝟒𝟏
0.15 𝟑
𝑪 = 10,000 (1 + ) = ₱𝟐𝟎, 𝟔𝟏𝟎. 𝟑𝟐 To final compound amount would be:
2
ANNUALLY 𝑪 = 34,729.83 + 289.41 = ₱𝟑𝟓, 𝟎𝟏. 𝟐𝟒
(5)(1) Direct Practical Method
0.15
𝑪 = 10,000 (1 + ) = ₱𝟐𝟎, 𝟏𝟏𝟑. 𝟓𝟕 Substitution
1 Principal Amount P 15,000.00 P 15,000.00
Compound Amount P 35,016.87 P 35,019.24
COMPOUND AMOUNT WITH FRACTIONAL INTEREST Compound Amount P20,016.87 P 20,019.24
PERIOD  The practical method gives a higher compound
There are instances when the total number of amount and interest; hence, it is used in actual
compounding periods is not an integer but a fraction. practice.
This happens when the term does not coincide with the
compounding periods or frequency of conversion. Compound Amount at Varying Rates
The term of the loan is 5 years and 2 months Both creditor and debtor may agree to change
compounded quarterly. The total compounding periods the interest rate during the borrowing term if the debtor
2 settles the obligation before the due date or requests an
will be 20 3, computed as follows:
extension of borrowing terms. Similarly, the interest
2 𝟐
Compounding Period = 4 (5 + 12) = 𝟐𝟎 𝟑 rates on bank deposits or investments may vary because
of changes in previously agreed terms or the
Methods of Finding the Compound Amount with implementation of a new monetary policy.
Fractional Interest Period The basic procedure under this case is to
1. DIRECT SUBSTITUTION METHOD - The compound compute individually the compound amounts within
amount is determined by directly substituting the given particular terms. The new principal will be the basis in
values to the compound amount formula. determining the compound amount of the succeeding
2. PRACTICAL METHOD – The compound amount is period with different terms and interest rates.
determined by using two interest rates – the compound
Mr. Lin invested P10,000 for 20 years. The terms are as 2. How long will it take for P78,550 to amount to
follows: in the first 5 years, the interest rate is 10% P100,000, if invested at 8% compounded monthly?
compounded quarterly; then it will be 12% 𝑭 100,000
𝒍𝒐𝒈 ( ) log ( )
compounded semi-annually for the next 7 years; and 𝑷 78,550
𝒕= = = 𝟑 𝒚𝒆𝒂𝒓𝒔
14% compounded annually for the remaining years. 𝒍𝒐𝒈(𝟏 + 𝒊)(𝒏) log (1 + 0.08) (12)
12
0.10 (5)(4) 3. If P30,700 accumulates to P50,000 in 5 years, what
𝑪 = 10,000 (1 + ) = ₱16,386.1644
4 is the rate compounded monthly?
(7)(2)
0.12
𝑪 = 16,386.1644 (1 + ) = ₱37,047.54391 𝒏𝒕 𝑭 (12)(5) 50,000
2 𝒓 = 𝒏 ( √ − 𝟏) = (12) ( √ − 1)
0.14 (8)(1) 𝑷 30,700
𝑪 = 37,047.54391 (1 + ) = ₱𝟏𝟎𝟓, 𝟔𝟖𝟏. 𝟑𝟐
1 = 𝟗. 𝟖%
4. Find the rate compounded quarterly if P17,345
Present Value accumulates to P22,325 in 3 years and 5 months.
 The present value is defined as the principal P
𝒏𝒕 𝑭
which, if invested for the given time t at a given 𝒓 = 𝒏 ( √ − 𝟏)
interest rate r, will amount to F on the date that F is 𝑷
due. 41
(4)( )
Example: 1222,325
= (4) ( √ − 1) = 𝟕. 𝟓%
If money can be invested at 5.6% converted quarterly, 17,345
find the present value of P42,000 due at the end of 3
years and 9 months.
𝑷 = 𝑭(𝟏 + 𝒊)−𝒏
 DIFFERENCES BETWEEN SIMPLE INTEREST AND
0.056 −15
𝑷 = 42,000 (1 + ) = ₱𝟑𝟒, 𝟎𝟗𝟒. 𝟏𝟔 COMPOUND INTEREST
4 SIMPLE INTEREST COMPOUND INTEREST
 Interest is calculated  Interest is calculated
only on the initial on both the initial
principal amount. principal amount and
Finding Time and Rate
accumulated interest
 Time refers to the term of an investment or how
long it will take a certain sum of money to  The interest earned  The interest earned is
amount to a certain other sum if it is invested at remains constant added to the
a certain interest rate. throughout the principal, resulting in
𝒏 investment period. exponential growth
𝒕= over time.
𝒎
 The logarithmic method is used to find n when the  Lower earnings  Higher earnings due
interest rate is compounded. compared to to the compounding
𝑭 compound interest effect overtime.
𝒍𝒐𝒈 ( )
𝑷  Generally used for  Commonly used in
𝒏=
𝒍𝒐𝒈(𝟏 + 𝒊) short-term loans or long-term
When the compound and principal amounts are given
investments investments or loans.
together with the time, the nominal rate and the
interest rate per compounding period can be calculated
 ANNUITY
using the formula.
NATURE OF ANNUITY
𝒏 𝑭 Annuity refers to a sequence or series of equal
𝒊 = √ −𝟏 payments made at an equal interval of time.
𝑷
Impliedly, if one of the elements is missing, the
ⅉ = (𝒊)(𝒎)
Let’s Try! payment is not considered as an annuity. Similarly, a
1. How long will it take P36,000 to amount to P40,000, series of payments of equal amount but made not of
if the interest rate is 5% quarterly? equal interval of time is also not considered an annuity.
𝑭 40,000 Similarly, a series of payments of unequal amounts,
𝒍𝒐𝒈 (𝑷) log (36,000 ) though made at an equal interval of time, is not
𝒕= = = 𝟐 𝒚𝒆𝒂𝒓𝒔 classified as an annuity.
𝒍𝒐𝒈(𝟏 + 𝒊)(𝒏) log (1 + 0.05) (4)
4
TERMS RELATED TO ANNUITY ⅈ = Periodic interest rate
 Term of the annuity or simply term refers to the n = Total compounding periods
period of time from the beginning of the first
payment interval up to the last payment interval Example:
 Periodic payment is the size or value of each Mae deposited ₱10,000 every end of the quarter for 1
payment. year at 12% compounded quarterly.
0.12
 Payment interval is the time between two Given: A=₱10,000 ; ⅈ = 4 𝑜𝑟 0.03 ; n=(1)(4)=4
successive periodic payments. (𝟏 + 𝒊)𝒏 − 𝟏
𝑪=𝑨
𝒊
KINDS OF ANNUITIES (1 + 0.03)4 − 1
1. Annuity certain 𝑪 = 10,000 = ₱𝟒𝟏, 𝟖𝟑𝟔. 𝟐𝟕
0.03
 It is an annuity with definite term. The first and last
payment intervals have definite dates. Payments on PRESENT VALUE OF ORDINARY ANNUITY
installment of household appliances are annuity Refers to the sum of the present value of all
certain. periodic payments, each payment is discounted from
2. Annuity uncertain the time of payment to the beginning of the term.
 It is an annuity with an indefinite term. The first In other words, the present value of an ordinary
payment interval has a definite date, but the last annuity determines the required amount at the
payment interval cannot be determined. beginning of the term, compounded during the entire
3. Ordinary annuity period, which will satisfy the required periodic payment
 It is an annuity where periodic payments are made every payment interval.
at the end of the payment interval. The present value of ordinary annuity is an
4. Annuity due effective investment tool to determine the required
 It is an annuity where the periodic payments are amount to be established for the payment of a specified
made at the beginning of the payment interval. obligation at specific or fixed a date.
5. Deferred Annuity 𝟏 − (𝟏 + 𝒊)−𝒏
 It is an annuity where the first periodic payment 𝑷=𝑨
𝒊
begins other than the first payment interval. Where:
6. Simple annuity P = Present value
 It is an annuity where payment intervals coincide A = Annuity Payment
with the interest compounding period. ⅈ = Periodic interest rate
7. Complex annuity n = Total compounding periods
 It is an annuity where payment intervals do not
coincide with the interest compounding period. Example:
Find the present value of an ordinary annuity of ₱10,
ORDINARY ANNUITY 000 at 12% compounded quarterly for 1 year.
An annuity is considered an ordinary annuity when 0.12
Given: A=₱10,000 ; ⅈ = 4 𝑜𝑟 0.03 ; n=(1)(4)=4
periodic payments are made at the end of payment 𝟏 − (𝟏 + 𝒊)−𝒏
intervals. If the time of periodic payments is not 𝑷=𝑨
𝒊
specified, it is usually understood that payments are 1 − (1 + 0.03)−4
made at the end of each payment interval. 𝑪 = 10,000 = ₱𝟑𝟕, 𝟏𝟕𝟏. 𝟎𝟎
0.03
FINDING THE PERIODIC PAYMENT OF ORDINARY
AMOUNT OF ORDINARY ANNUITY (FUTURE VALUE) ANNUITY
The amount of an ordinary annuity is equal to the sum The required periodic payment or annuity payment may
of the compound amounts of several payments from the be determined, provided the following are given:
first interval payment to the end of the term. Therefore, 1. Present value or the maturity value
it refers to the future value of compounded periodic 2. Compounding period
payments at a given interest rate. 3. Interest rate
(𝟏 + 𝒊)𝒏 − 𝟏
𝑪=𝑨  If the present value is given, the formula to
𝒊 compute the periodic or annuity payment is:
Where: 𝑷
C = Compound amount or sum of an annuity 𝑨=
𝟏 − (𝟏 + 𝒊)−𝒏
A = Annuity payment 𝒊
where: If the future amount of the annuity is given, the factor
P = Present value of an annuity is:
A = Annuity payment 𝑭𝒖𝒕𝒖𝒓𝒆 𝑽𝒂𝒍𝒖𝒆
𝑭𝒂𝒄𝒕𝒐𝒓 =
i = Periodic interest rate 𝑨𝒏𝒏𝒖𝒊𝒕𝒚 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
n = Total compounding periods Example:
The factor of P60,000 now at 12% compounded
Example: quarterly with an annuity periodic payment of P6,800 is
What sum will be paid at the end of each quarter for 6 8.823529 (P60,000/P6,800). Using table 4, the factor is
years and 6 months, if the present value is ₱50,500 and between the following values:
interest is paid at 10% compounded quarterly? n = 10 = 8.530203
0.10
Given: P=₱50,500 ; ⅈ = 4 = 0.025 ; n=(6.5)(4)=26 ? = 8.823529
𝑷 n = 11 = 9.252624
𝑨=
𝟏 − (𝟏 + 𝒊)−𝒏
𝒊 2. Logarithmic Method
50,500  If the present value, the interest rate, and the
𝑨= = ₱𝟐, 𝟔𝟔𝟒. 𝟖𝟐
1 − (1 + 0.025)−26 periodic payment are given, the formula in
0.025 finding the term of an ordinary, which was
derived through the process of substitution, is:
 If the maturity value or future amount is given, 𝒍𝒐𝒈𝑨 − 𝒍𝒐𝒈(𝑨 − 𝑷𝒊)
the periodic payment is: 𝑻=
𝒇 𝒍𝒐𝒈(𝟏 + 𝒊)
𝑪 where:
𝑨=
(𝟏 + 𝒊)𝒏 − 𝟏 T = Term of ordinary annuity
𝒊 P = Present value of an annuity
where:
A = Annuity payment
C = Compound amount or sum of an annuity
i = Periodic interest rate
A = Annuity payment
f = Frequency of conversion
i = Periodic interest rate
n = Total compounding periods
Example:
Merlyn borrowed ₱60,000 payable on installment of
Example:
₱15,000 at the end of every quarter. If money is worth
Jocelyn plans to construct her house at an estimated
12% compounded quarterly, how long will it take her to
cost of ₱500,000 a year. If money is worth 12%
pay the debt and the interest?
compounded quarterly, how much will she deposit 0.12
every end of the quarter for 1 year? Given: A=15,000 ; P=60,000 ; ⅈ = = 0.03 ; f=4
4
0.12
Given: C=₱500,000 ; ⅈ = 4 = 0.03 ; n=(1)(4)=4 𝒍𝒐𝒈𝑨 − 𝒍𝒐𝒈(𝑨 − 𝑷𝒊)
𝑻=
𝑪 𝒇 𝒍𝒐𝒈(𝟏 + 𝒊)
𝑨= 𝑙𝑜𝑔15,000 − 𝑙𝑜𝑔[(15,000 − (60,000)(0.03)]
(𝟏 + 𝒊)𝒏 − 𝟏 𝑻=
𝒊 4 𝑙𝑜𝑔(1 + 0.03)
500,000 𝑻 = 𝟏. 𝟎𝟖𝟏 𝒚𝒆𝒂𝒓𝒔 𝒐𝒓 𝟏 𝒚𝒆𝒂𝒓 𝒂𝒏𝒅 𝟏 𝒎𝒐𝒏𝒕𝒉
𝑨= = ₱𝟏𝟏𝟗, 𝟓𝟏𝟑. 𝟓𝟐
(1 + 0.03)4
0.03  If the maturity value or future amount is given,
the formula is:
FINDING THE TERM OF ORDINARY ANNUITY 𝒍𝒐𝒈(𝑨 + 𝑪𝒊) − 𝒍𝒐𝒈𝑨
The term of an ordinary annuity may be determined 𝑻=
𝒇 𝒍𝒐𝒈(𝟏 + 𝒊)
using the following methods: where:
T = Term of ordinary annuity
1. Interpolation Method C = Compound amount or future value of an annuity
To find the term of an ordinary annuity using the A = Annuity payment
interpolation method, the present value or future value i = Periodic interest rate
is divided with the annuity payment. f = Frequency of conversion
 If the present value is given, the factor is Example:
computed as follows: Irene is setting up a fund of ₱60,000 to purchase a
𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 computer. If she deposits ₱12,000 in a bank every end
𝑭𝒂𝒄𝒕𝒐𝒓 =
𝑨𝒏𝒏𝒖𝒊𝒕𝒚 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
of the quarter, which pays an interest of 12% Irene is setting up a fund of ₱60,000 to purchase a
compounded quarterly, how long will it take her to raise computer. If she deposits ₱12,000 in a bank every end
the desired amount? of the quarter, which pays an interest of 12%
Given: A=12,000 ; C=60,000 ; ⅈ = 0.03 ; f=4 compounded quarterly, how long will it take her to raise
𝒍𝒐𝒈(𝑨 + 𝑪𝒊) − 𝒍𝒐𝒈𝑨 the desired amount?
𝑻=
𝒇 𝒍𝒐𝒈(𝟏 + 𝒊) Given: C = 60, 000; A = 12, 000; i = 0.03; n = 4; x = ?
𝑙𝑜𝑔[(12,000 + 60,000)(0.03))] − log 12,000
( (𝟏 + 𝒊)𝒏 − 𝟏
𝑻= 𝑪=𝑨 +𝒙
4 log(1 + 0.03 𝒊
(1 + 0.03)4 − 1
𝑻 = 𝟏. 𝟏𝟖 𝒚𝒆𝒂𝒓𝒔 𝒐𝒓 𝟏 𝒚𝒆𝒂𝒓 𝒂𝒏𝒅 𝟐. 𝟏𝟖 𝒎𝒐𝒏𝒕𝒉𝒔 60,000 = 12,000 +𝑥
0.03
60,000 = 12,000(4.18363) + 𝑥
FINDING THE FINAL AMOUNT OF THE LAST PAYMENT 𝑥 = 60,000 − 50,203.52 = ₱𝟗, 𝟕𝟗𝟔. 𝟒𝟖
In actual practice, payments of ordinary annuity are
made at equal payment intervals. However, in case a FINDING THE INTEREST RATE
situation arises where the final payment is not made on In finding the interest rate of an annuity, the values of
exact payment intervals, there is a need to compute the the following elements must be given:
final amount of the last payment. 1. Present or future value of an annuity
 To find the final payment where the present 2. Periodic payment
value is given, the equation of values may 3. Term
appear as: The interest rate may be computed using the following
𝟏 − (𝟏 + 𝒊)−𝒏
𝑷=𝑨 + 𝒙(𝟏 + 𝒊)−𝒏−𝟏 methods:
𝒊 1. Interpolation method
where:
In interpolation method, the present or future value is
P = Present value
divided by the annuity payment. The result is referred to
A = Annuity payment
the appropriate tables provided at the back of this book.
i = Periodic rate
 If the present value is given, the formula is:
n = Number of conversion period 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆
x = Final last payment 𝑭𝒂𝒄𝒕𝒐𝒓 =
𝑨𝒏𝒏𝒖𝒊𝒕𝒚 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
Example:
In locating the value of the factor, the guide is the total
Merlyn borrowed P60, 000 payable on instalment of
conversion periods. Thus, if the term is 3 years and the
P15,000 at the end of every quarter. If money is worth
interest is compounded quarterly, the total conversion
12% compounded quarterly, how long will it take her to
period is 12. From this value, run your finger to the right
pay the debt and the interest?
of the table until the factor is matched with what is
Given: P = P60, 000; A = P15, 000; i = 0.03; n = 4; x = ?
stated in Table 4. The interest rate located at the top of
𝟏 − (𝟏 + 𝒊)−𝒏
𝑷=𝑨 + 𝒙(𝟏 + 𝒊)−𝒏−𝟏 such column is the periodic interest rate of an annuity.
𝒊
1 − (1 + 0.03)−4
60,000 = 15,000 + 𝑥(1 + 0.03)−4−1 2. Quadratic equation or quadratic formula
0.03
60,000 = 15,000(3.72) + 0.8626𝑥 The field of mathematics has provided the following
60,000 − 55,800 formulas to solve the interest rate of an annuity when
𝑥= = ₱𝟒, 𝟖𝟔𝟗. 𝟎𝟎 unknown:
0.6828
 If the present value is given, the formula is:
 The formula to compute the amount of final 𝒏𝑨
−𝟔(𝒏 + 𝟏) + √[𝟔(𝒏 + 𝟏)]𝟐 − 𝟒𝟖(𝒏𝟐 − 𝟏) (𝟏 − 𝑷 )
payment if the maturity value or future amount 𝒊=
is given is: 𝟐(𝒏𝟐 − 𝟏)
(𝟏 + 𝒊)𝒏 − 𝟏 where:
𝑪=𝑨 +𝒙 A = Annuity payment
𝒊
where: i = Periodic interest rate
C = Compound amount or sum of an annuity n = Total compounding periods
A = Annuity payment P = Present value of an amount
i = Periodic interest rate  If the future or maturity value is given, the
n = Total compounding periods formula to compute the periodic interest rate of
x = Final payment or deposit an annuity is:
Example:
 𝒏𝑨
𝟔(𝒏 − 𝟏) − √[𝟔(𝒏 − 𝟏)]𝟐 − 𝟒𝟖(𝒏𝟐 − 𝟏) (𝟏 − )
𝑪 PRESENT VALUE OF AN ANNUITY DUE
𝒊=
𝟐(𝒏𝟐 − 𝟏)
The present value of an annuity due is the sum
where:
of the present values of all periodic payments at the
A = Annuity payment
time of the first payment. In other words, the present
i = Periodic interest rate
value of an annuity due is the value now of all its
n = Total compounding periods
periodic payments.
C = Future value or compound amount
The concept of the present value of an annuity
due is basically similar with the present value of an
 ANNUITY DUE
ordinary annuity, except that there is an extra period
NATURE OF ANNUITY DUE
added after the last periodic payment.
An annuity due is a series of equal periodic 𝟏 − (𝟏 + 𝒊)−𝒏
payments made at the beginning of each payment 𝑷=𝑨 (𝟏 + 𝒊)
𝒊
interval. In other words, annuity due is an opposite of where:
ordinary annuity in terms of timing of payment. P = Present Value of an annuity
If the first payment is made at the beginning of A = Annuity payment
the first payment period in annuity due, it does not i = Periodic interest rate
follow that the last payment should also be made at the n = Total compounding periods.
end of the term. In an annuity due, the end of the term Example:
is one payment interval after the last periodic payment. Pietro, a college student of the University of the East, is
The term of the annuity due starts on the first granted a scholarship which will pay P6,500 at the
periodic payment, which is made at the beginning of beginning of each month for 4 years. If money is worth
the payment interval, and ends at one payment interval 18% compounded monthly, find the present value of the
after the last periodic payment. scholarship.
Given: A = P6,500; i = 0.015; n = 48
AMOUNT OF ANNUITY DUE (FUTURE VALUE) 𝟏 − (𝟏 + 𝒊)−𝒏
The amount of an annuity due or its future 𝑷=𝑨 (𝟏 + 𝒊)
𝒊
value is the accumulated value of all periodic payments 1 − (1 + 0.015) −48
from the first payment interval up to the end of the 𝑷 = 6,500 (1 + 0.015)
0.015
term. Since the term on an annuity due continues by 1 = ₱𝟐𝟐𝟒, 𝟓𝟗𝟓. 𝟕𝟓
periodic period after the last payment, the accumulated
amount, therefore, still earns an interest for 1 PERIODIC PAYMENT OF AN ANNUITY DUE
compounding period. The periodic payment of an annuity due may be
The amount of the annuity due is basically determined if the values of the following are given:
similar with that of an ordinary annuity, except that the 1. Present or future value of an annuity due
first periodic payment already earns an interest and the 2. Interest rate
accumulated amount on the last payment interval also 3. Total number of periodic payments or compounding
earns an interest. periods
(𝟏 + 𝒊)𝒏 − 𝟏  If the present value of an annuity due is given,
𝑪=𝑨 (𝟏 + 𝒊)
𝒊 the periodic payment may be computed by
where: using either:
C = Compound amount or sum of an annuity 𝟏 𝒊
𝑨=𝑷 (𝟏 + 𝒊)−𝟏 𝒐𝒓 𝑨=𝑷
A = Annuity payment 𝟏 − (𝟏 + 𝒊)−𝒏 [𝟏 − (𝟏 + 𝒊)−𝒏 ](𝟏 + 𝒊)
𝒊
i = Periodic interest rate where:
n = Total compounding periods. P = Present Value of an annuity
Example: A = Annuity or periodic payment
Mae deposited ₱10,000 every beginning of a quarter for i = Periodic interest rate
1 year at 12% compounded quarterly. n = Total compounding periods.
Given: A = P10,000; i = 0.03; n = 4 Example:
(𝟏 + 𝒊)𝒏 − 𝟏
𝑪=𝑨 (𝟏 + 𝒊) A television set is being sold for P20,000 and can be
𝒊 bought on quarterly installment payments for one year.
4
(1 + 0.03) − 1
𝑪 = 10,000 (1 + 0.03) What is the quarterly installment payment if the interest
0.03 rate is 10% compounded quarterly?
= ₱𝟒𝟑, 𝟎𝟗𝟏. 𝟑𝟔
Given: P = P20,000; i = 0.025; n = 4
𝒊
𝑨=𝑷
[𝟏 − (𝟏 + 𝒊)−𝒏 ](𝟏 + 𝒊)
0.025
𝐴 = 20,000
[1 − (1 + 0.025)−4 ](1 + 0.025)
= ₱𝟓, 𝟏𝟖𝟔. 𝟔𝟗
 If the future value or compound amount is
given, the periodic payment or deposit of an
annuity due is computed using either the
formula:
𝟏 𝒊
𝑨=𝑪 (𝟏 + 𝒊)−𝟏 𝒐𝒓 𝑨 = 𝑪
(𝟏 + 𝒊)𝒏 − 𝟏 [(𝟏 + 𝒊)𝒏 − 𝟏](𝟏 + 𝒊)
𝒊
where:
C = Compound amount or future value of an annuity
A = Annuity or periodic payment
i = Periodic interest rate
n = Total compounding periods.
Example:
Marem needs P50,000 1 year from now. If money is
worth 10% compounded quarterly, how much should be
deposited at the beginning of each quarter?
Given: C = P50,000; i = 0.025; n = 4
𝒊
𝑨=𝑪 𝒏
[(𝟏 + 𝒊) − 𝟏](𝟏 + 𝒊)
0.025
𝑨 = 50,000
[(1 + 0.025)4 − 1](1 + 0.025)
= ₱𝟏𝟏, 𝟕𝟒𝟕. 𝟐𝟏