Department of Mathematics

in Basic Education
2024 - 2025
COMPOUND INTEREST
OCTOBER 14-18, 2024

GENERAL Mathematics
2024 - 2025
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1 T MMATURITY
T U R I Y A DATE
AEDT
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1 N E INTEREST
E T T R I S RATE
ERTA
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1 I I PRINCIPAL
PPCNLRA
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1 A EQUARTERLY
ULQRRTY
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1 R BORROWER
WORBORE
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COMPOUND
M O C U D O N P INTEREST
TNTREESI
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5 4 At the end of this topic, the learners will be
able to:
3 1 Illustrate compound interest

2 Distinguish between simple and compound interest

2
compute interest, maturity value, future value, and
3 present value in compound interest environment
1 apply the different formulas involve in compound
4 interest environment in solving problems
4 5
determine the rate and time in a compound interest
5 environment
1 5 Your father asked you about investment and wanted to know the interest that will be
earned if he will invest ₱500,000.00 in a certain bank that offers an annual
compounding interest of 8% for 5 years.
4 Time Amount Intere Solution Interest Amount at the
(t) at st end of year t
the start rate (Future value)
of (r)
3 year t
1 500,000 8% (500,000)(0.08)(1)
2 540,000 8% 43,200
2 3 8% (583,200)(0.08)(1) 629,856
4 8% 50,388.48 680,244.48

5 1 5 680,244.
48
8% 54,419.56
 Compound Interests
1 5
4 ✓ is the interest computed on the principal and also
on the accumulated past interest, so compound
interest is a way to earn money because you don’t
3 just earn using your original money, but also the
interest you earned.
✓ is not like a simple interest wherein only the
principal is considered in the computation this type
2 of interest considers the principal and the
1 accumulated past interest.
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 Compound Interests
1 5
PERMA - DEBT
4

3
a continuous outstanding balance of a credit card
where they pay the monthly minimum that fits in their
budget to lessen the burden of interest monthly but
2 tries to add some debt again on the following month
so the debts never end.
5 1
 Compound Interests
1 5 To find the compound interest, which is compounded
4 annually the formula to find the maturity value is:
𝑨 = 𝑷(𝟏 + 𝒓)𝒕
To find the compound interest use the formula:
3
𝑰=𝑨−𝑷
To find the present value or principal of the maturity
2 value F due in t years the formulas are:
𝑨
5 1 −𝒕
𝑷 = 𝑨(𝟏 + 𝒓) 𝒐𝒓 𝑷 =
(𝟏 + 𝒓)𝒕
 Examples:
1 5 Given: 𝑃 = ₱18,500 , 𝑟 = 3% and
4 compounded annually for 3 years, find the
maturity value (A) and the compound interest.

2
5 1
 Examples:
1 5 Given: 𝐴 = ₱15,000 , 𝑟 = 2% and
4 compounded annually for 4 years, find the
present value (P).

2
5 1
 Compounding More Than Once a Year
1 5 • Frequency of conversion (m) – number of conversion period in one
year
• Conversion or interest period – time between successive
4 conversions of interest
Compound No. of Compounding or
frequency compounding or conversion periods
conversion per
3 year
Annually 1 1 year
Semi – annually 2 6 months
2 Quarterly 4 3 months
Bimonthly 6 2 months
5 1 Monthly 12 1 month
Daily 365 1 day
 Compounding More Than Once a Year
1 5
• Frequency of conversion (m) – number of conversion period in
4 one year
• Conversion or interest period – time between successive
conversions of interest
3 • Total number of conversion periods (n)
𝑛 = 𝑚𝑡 (𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛) 𝑥 (𝑡𝑖𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠)
• Nominal rate (j) – annual rate of interest or interest rate per year
• Periodic Interest Rate (i) – of interest for each conversion period
2 𝑖= =
𝑗 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑚 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛
5 1
 Compounding More Than Once a Year
1 5
4 The formula of Maturity Value for interest compounding m
times a year is:
𝑨 = 𝑷(𝟏 + 𝒊)𝒏
3 Meanwhile, the formula in finding the present value
given the maturity value is:
−𝒏
𝑨
2 𝑷 = 𝑨(𝟏 + 𝒊) 𝒐𝒓 𝑷 =
(𝟏 + 𝒊)𝒏
where:
5 1 A = maturity (future) value
P = principal or present value
i=
𝑗
𝑚
n = mt
 Examples:
1 5 What will be the maturity value of Php12,000
4 invested for 4 years at 15% compounded quarterly?

2
5 1
 Examples:
1 5 Find the interest earned at the end of 4 years if
4 Php36,700 is invested at 12% compounded bi
monthly.

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 Examples:
1 5 Andrei wants to have Php1,500,000 in 5 years and 2
4 months. If the banks interest is 12% compounded
quarterly, how much should he deposit in the bank
now?
3

2
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 Examples:
1 5 Sarge paid Php8,600 on a loan made 2 years before
4 at 6% compounded bi- monthly. Find the interest
generated.

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 Examples:
1 5 What amount must be invested now in a savings
4 account earning 9% compounded quarterly to
accumulate a total of Php 21,000 after 4 and 3/4
years?
3

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1 5 Determine the maturity value of Php 3,000 invested
4 at 9.5% compounded semiannually for 3 and 1/2
years.

2
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1 5 Find the compound interest if Php50,000 is invested
4 at 8% compounded quarterly for 4 years.

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1 5 Determining for Rate
4
1
3 𝐴 𝑛
r= −1 𝑚
𝑃
2
5 1
 Examples:
1 5 At what rate of interest compounded semi-annually
4 will 14,300 accumulate to 17,000 in 2 years and 6
months?

2
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3 2
Performance The Compass
1 Task Assigned Date:
Today
MATHEMATEACH Submission Date:
TALK Next Week
5 Assigned Date:
Today Business Proposal
Submission Date: Assigned Date:
4 Next Week Today
Submission Date:
2 3 Next Week
Transforming Ambassadors
One Equation at a Time.