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S11MATH: Basic Business Mathematics
Compound
interest
S11MATH: Basic Business Mathematics
Definition of Terms
Compounding Interest –An interest resulting from
the periodic addition of simple interest to the
principal
...
Total Number of Conversion Period ( n ) – given
by n = mt where t is the number of years
...
S11MATH: Basic Business Mathematics
Compound Interest Formula
F
Where
P (1 i)n
F – Maturity/Future Value
P – Principal Amount
i – Periodic Rate equal to
n – Total number of conversion period (mt)
S11MATH: Basic Business Mathematics
List of Other Formulae Associated
with Compounding Interest
When looking for the Principal:
P
F (1 i) n
When looking for the Interest Rate:
1
Fn
r m
P
1
S11MATH: Basic Business Mathematics
List of Other Formulae Associated
with Compounding Interest
When looking for the Time:
F
log
t
P
m [log (1 i)]
S11MATH: Basic Business Mathematics
Example 1:
Find the compound amount (maturity value) and
interest if ₱10,000 is deposited in a bank at 2%
compounded quarterly for 5 years
...
How much will
the lender receive at the end of the term?
Example 4:
How much will be invested to accumulate ₱90,000 at
the end of 6 years if the money ears 9% interest rate,
compounded monthly?
S11MATH: Basic Business Mathematics
Example 5:
Lorenzo invested ₱50,000 for 2 years
...
5% interest rate,
compounded annually
...