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BUSINESS FINANCE PREPARED BY: GROUP 1 Ms. Lilibeth Bautista
BUSINESS FINANCE PREPARED BY: GROUP 1 Ms. Lilibeth Bautista
BUSINESS FINANCE PREPARED BY: GROUP 1 Ms. Lilibeth Bautista

BUSINESS

FINANCE

PREPARED BY: GROUP 1 Ms. Lilibeth Bautista

Compound Interest The usual assumption in most business transaction is to use compound interest. Compound interest
Compound Interest The usual assumption in most business transaction is to use compound interest. Compound interest
Compound Interest The usual assumption in most business transaction is to use compound interest. Compound interest

Compound Interest

The usual assumption in most business

transaction is to use compound interest.

Compound interest is simply earning interest. This

means that the basis for the computation of the applicable interest for a certain period is not only

the original principal but also any interest earned in

the previous period assuming all cash flows would be paid or received in lump sum upon maturity.

FORMULA

FORMULA A= future value P= principal r= annual rate n= number of compounding periods a year
FORMULA A= future value P= principal r= annual rate n= number of compounding periods a year
FORMULA A= future value P= principal r= annual rate n= number of compounding periods a year

A= future value P= principal r= annual rate

n= number of compounding periods a year

t= number of years

A = P(1+r/n)rxt

EXAMPLE 1

EXAMPLE 1 An investment earns 3% compounded monthly. Find the value of an initial investment of
EXAMPLE 1 An investment earns 3% compounded monthly. Find the value of an initial investment of
EXAMPLE 1 An investment earns 3% compounded monthly. Find the value of an initial investment of

An investment earns 3% compounded monthly. Find the value of an initial investment of P5,000 after 6 years.

r =

0.03

n =

12

P = 5,000

t = 6

A = P(1+r/n)nxt

=5000(1+0.03/12)12×6

=P5984.74

EXAMPLE 2

EXAMPLE 2 What is the value of an investment of P3,500 after 2 years if it
EXAMPLE 2 What is the value of an investment of P3,500 after 2 years if it
EXAMPLE 2 What is the value of an investment of P3,500 after 2 years if it

What is the value of an investment of P3,500 after 2 years if it earns 1.5% compounded quarterly?

r =

0.015

n =

4

P = 3,500 t = 2

A = P(1+r/n)nxt

=3,500(1+0.015/4)4×2

=P3,606.39

EXAMPLE 3

EXAMPLE 3 Mary paid P8,000 at 4% after 3 years in finance compounded quarterly. To find
EXAMPLE 3 Mary paid P8,000 at 4% after 3 years in finance compounded quarterly. To find
EXAMPLE 3 Mary paid P8,000 at 4% after 3 years in finance compounded quarterly. To find

Mary paid P8,000 at 4% after 3 years in finance compounded quarterly. To find the compound interest.

r = .4 P = 8000 t = 3 n= 4

A = P(1+r/n)nxt

=8,000(1+.4/4)4×3

=P25107.43

EXAMPLE 4 An investment earns 2.5% compounded monthly. Find the value of an initial investment of
EXAMPLE 4 An investment earns 2.5% compounded monthly. Find the value of an initial investment of
EXAMPLE 4 An investment earns 2.5% compounded monthly. Find the value of an initial investment of

EXAMPLE 4

An investment earns 2.5% compounded monthly. Find

the value of an initial investment of P4,500 after 5 years.

r = 0.025

P = 4,500

t = 5 n= 12

A = P(1+r/n)nxt

=4500(1+0.025/12)12×5

=P5098.51

EXAMPLE 5 What is the value of an investment of P8,000 after 3 years if it

EXAMPLE 5

What is the value of an investment of P8,000 after 3 years if it earns 3% compounded quarterly?

r = 0.03 P =8,000

t = 3

n= 4

A = P(1+r/n)nxt

=8000(1+0.03/4)4×3

=P8750.46

SEATWORK September 18, 2018
SEATWORK September 18, 2018
SEATWORK September 18, 2018

SEATWORK

September 18, 2018

1.Alvin investment earns 5% compounded monthly. Find the value of an initial investment of P7,000 after 7 years. r = 0.05

P =7,000

t = 7 n= 12

A = P(1+r/n)nxt

=7000(1+0.05/12)12×7

=P9926.25

2.Zeke investment earns 3.5% compounded quarterly. Find the

value of an initial investment of P6,500 after 6 years. r = 0.035

P =6,500

t = 6 n= 4

A = P(1+r/n)nxt

=6,500(1+0.035/4)4×6

=P8011.59

3. What is the value of an investment of P10,000 after 5 years if it earns 3.5% compounded quarterly. r = 0.035

P =10,000

t = 5 n= 4

A = P(1+r/n)nxt

=10,000(1+0.035/4)4×5

=P11,903.40

4. What is the value of an investment of $8,500 after 2 years if it earns 1.4% compounded quarterly. r = 0.014

P =8,500

t = 2 n= 12

A = P(1+r/n)nxt

=8,500(1+0.014/12)12x2

=$8741.22

5. Matthew investment earns 3.2% compounded quarterly. Find the

value of an initial investment of $5,000 after 6 years. r = 0.032

P =5,000

t = 6 n= 4

A = P(1+r/n)nxt

=5000(1+0.032/4)4x6

=$6053.73

Goli, Francel Santos, Claire Ann Quince, Marjurie Buenaventura, Allyza Sevilla, Renz Singzon, Reynaldo Lopez, Matthew Flores,
Goli, Francel Santos, Claire Ann Quince, Marjurie Buenaventura, Allyza Sevilla, Renz Singzon, Reynaldo Lopez, Matthew Flores,
Goli, Francel Santos, Claire Ann Quince, Marjurie Buenaventura, Allyza Sevilla, Renz Singzon, Reynaldo Lopez, Matthew Flores,

Goli, Francel

Santos, Claire Ann

Quince, Marjurie

Buenaventura, Allyza Sevilla, Renz

Singzon, Reynaldo

Lopez, Matthew

Flores, Myca

Alobog, Sed