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Module 2 Math of Investment

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59 views

Module 2 Math of Investment

Uploaded by

vlythevergreen
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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TAGOLOAN Community College

Baluarte, Tagoloan, Misamis Oriental


Tel.No. (08822)740-835/(088)5671-215

College/Department: Bachelor of Science in Business Administration (BSBA)


COURSE Code: CBMC 102 - MATHEMATICS OF INVESTMENT
2nd Semester of A.Y. 2023-2024

Introduction

Compound interest is the interest you earn on interest. It refers to the phenomenon
whereby the interest associated with a bank account, loan, or investment increases
exponentially over time. The key to understanding the concept is the word “compound”.
Compound interest makes your money grow faster because interest is calculated on the
accumulated interest over time as well as on your original principal. Compounding can
create a snowball effect, as the original investments plus the income earned from those
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investments grow together.

Rationale

Students will learn about compound interest as it applies to credit, debt, and saving. Students
learn what compound interest is and how it can work for someone (by growing savings
deposits over time) or against them (by increasing the amount owed on unpaid debt).
Students will also learn ways to earn the best interest rates on their savings and how time
magnifies the benefits or costs of compound interest.

Intended Learning Outcomes

A. Define and explain what compound interest is.


B. Calculate the benefits and cost of compound interest.
C. Learn ways on how to earn the best interest rates on savings.
D. Relate and Discuss

Activity

1. Find the present value of P60,000, due at the end of 4 years, if money is worth 10%,
compounded semiannually.

2. Cecil borrowed P85,000 from Vilma at 9%, compounded monthly, but was unable to
pay the interest for the first 2 years. How much should Cecil pay Vilma in order to
continue at the original principal?

Discussion

Read topics attached below.

Exercises
1. Find the amount due at the end of 10 years if P42,000 is invested at 9%, compounded
quarterly.
2. Accumulate P30,000 for 2 years at (a) 9% simple interest, (b) 9%, compounded
monthly.
3. If interest is compounded monthly, what nominal rate is equivalent to an effective rate
of 8%?
4. Find the nominal rate, converted quarterly, that is equivalent to 8% effective rate.

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Assessment

Evaluation Approaches and Methods:

 Assignment (related activity designed in the syllabus as feedback to connect the past and
present)
 Quizzes (long and short: Announced and un-announced)
 Project (activity compilations)
 Major Exams (Mid-term and Final)

Reflection
 Explain in your own understanding what compound interest is.
 Would you lend money to a friend? if so, would you expect to be paid back more
than they lent because their money was unavailable for a period of time? (limit your
answer to one-two paragraphs only).

Resources and Additional Resources


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 Mathematics of Investment, Third edition (2012). Leodegario SM. Bautista et al.

Additional Resources:
 https://www.investopedia.com/terms/c/compoundinterest.asp
 https://www.mathsisfun.com/money/compound-interest.html
 https://smallbusiness.chron.com/uses-compound-interest-business-49709.html

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