General Mathematics Compound Interest week1.pptx

compound interest

1. Compound Interest Week 1

2. OBJECTIVE: At the end of the lesson, the learner is able to compute interest, maturity value, and present value in compound interest environment, and solve problems involving compound interest

3. Lesson Outline 1. Maturity value 2. Present Value

4. The following table shows the amount at the end of each year if principal P is invested at an annual interest rate r compounded annually. Computations for the particular example P = P100,000 and r = 5% are also included.

5. Principal = P100,000 r = 5% compounded annually

6. Example 1. Find the maturity value and the compound interest if P10,000 is compounded annually at an interest rate of 2% in 5 years.

7. Solution: Find the maturity value and the compound interest if P10,000 is compounded annually at an interest rate of 2% in 5 years. Given: P = 10,000 r = 2% = 0.02 t = 5 years Find: (a) maturity value F (b) compound interest                    

8. Example 2. Find the maturity value and interest if P 50,000 is invested at 5% compounded annually for 8 years.

9. Solution: Find the maturity value and interest if P 50,000 is invested at 5% compounded annually for 8 years. Given: P = 50,000 r = 5% = 0.05 t = 8 years Find: (a) maturity value F (b) compound interest                    

10. Example 3. Suppose your father deposited in your bank account P10,000 at an annual interest rate of 0.5% compounded yearly when you graduate from kindergarten and did not get the amount until you finish Grade 12. How much will you have in your bank account after 12 years?

11. Solution: Suppose your father deposited in your bank account P10,000 at an annual interest rate of 0.5% compounded yearly when you graduate from kindergarten and did not get the amount until you finish Grade 12. How much will you have in your bank account after 12 years? Given: P = 10,000 r = 0.5% = 0.005 t = 12 years Find: F       after 12 years.  

12. Present Value P at Compound Interest: The present value or principal of the maturity value F due in t years any rate r can be obtained from the maturity value formula   Solving for the present value P,

13. Present Value P at Compound Interest:

14. Example 4. What is the present value of P50,000 due in 7 years if money is worth 10% compounded annually?

15. Solution: What is the present value of P50,000 due in 7 years if money is worth 10% compounded annually? Given: F = 50,000 r = 10% = 0.1 t = 7 years Find: P        

16. Example 5. How much money should a student place in a time deposit in a bank that pays 1.1% compounded annually so that he will have P200,000 after 6 years?

17. Solution: How much money should a student place in a time deposit in a bank that pays 1.1% compounded annually so that he will have P200,000 after 6 years? Given: F = 200,000 r = 1.1% = 0.011 t = 6 years Find: P   .      

18. Thank you for listening! See you next time!