Principal Compound Maturity

Rate (r) Time (t)

(P) Interest (Ic) Value (F)
10,000 8% 15
21,721.69 31,721.69
3,000 5% 6 1,020.29 4,020.29
50,000 10.5% 10 85,704.04 135,704.04

45,286.54 2% 5 4,713.46 50,000

80,157.91 9.25% 2.5 19,842.09 100,000

Group Work
Given a principal of Php 10,000, which of the
following options will yield greater interest after 5
years
Group 1 and 2 will earn compound interest each year
at a rate of 2%.
Group 3 and 4 will earn compound interest every six
months at a rate of 2%. 1% after 6 months and 1%
after another 6 months
 Group 1 and 2 Group 3 and 4
Time (t) in years investment investement
½
(10,000)(1.02) = (10,000)(1.01) = 10,100
1
10,200 (10,100)(1.01) = 10,201
1½
2
2½
3
3½
4
4½
5
 Group 1 and 2 Group 3 and 4
Time (t) in years investment investement
½ 10,100
10,200
1 10,201
1½ 10,303.01
10,404
2 10,406.04
2½ 10,510.10
10,612.08
3 10,615.20
3½ 10,721.35
10,824.32
4 10,828.56
4½ 10,936.85
11,040.81
5 11,046.22
Compounding More
than Once a Year
Where:

Rate (j) of interest for

each conversion period Total number of
conversion periods n
Definition of terms:

Conversion or interest period – time between

successive conversion of interest

Frequency of conversion (m) – number of

conversion periods in one year

Nominal rate – annual rate of interest

Where:
F = maturity (future) value
P = principal

m = frequency of conversion
t = term / time in years
Examples
1. Find the maturity value and interest if Php
10,000 is deposited in a bank at 2% compounded
quarterly for 5 years.

2. Chris borrows Php 50,000 and promises to pay

the principal and interest at 12% compounded
monthly. How much must he repay after 6 years?
 Frequency of Interest rate
Interest
Nominal Rate compounded conversion per
Conversion
(m) Period
Semi-
12% 2 6%
annually
16% Quarterly 4 4%
9% Monthly 12 0.75%
10.95% Daily 365 0.03%
Seatwork
1. What is the present value of Php 25,000 due in 2
years and 6 months if money is worth 10%
compounded quarterly?
2. You are planning to invest Php 100,000. Bank A
is offering 5% compounded semi-annually while
Bank B is offering 4.5% compounded monthly. If
you plan to invest this amount for 5 years, in which
bank should you invest? Justify your answer
Peer Tutoring
Total number
Interest Frequency Interest
Nominal of Compound Maturity
Principal Compound of rate per years
rate conversions ed Interest Value
ed conversion period per years

Semi-
5,000 6% 10
annually

3 years
30,000 2% quarterly and 9
months

10% monthly 5 100,000