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Narrative Graphic Report On Interest and Loans

Arian was offered three investment options from different banks. Northsouth Bank offered a 4.5% simple interest rate. BPO Bank offered 4.5% interest compounded monthly. Chaynabank offered 5% interest compounded weekly. To determine the best offer, the future values of Arian's 150,000 php investment over 1 year were calculated for each bank using the appropriate interest formulas. Chaynabank provided the highest future value of 157,686.88 php, so it offered the best return.

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Cheska MANIQUIS
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354 views11 pages

Narrative Graphic Report On Interest and Loans

Arian was offered three investment options from different banks. Northsouth Bank offered a 4.5% simple interest rate. BPO Bank offered 4.5% interest compounded monthly. Chaynabank offered 5% interest compounded weekly. To determine the best offer, the future values of Arian's 150,000 php investment over 1 year were calculated for each bank using the appropriate interest formulas. Chaynabank provided the highest future value of 157,686.88 php, so it offered the best return.

Uploaded by

Cheska MANIQUIS
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Summative Assessment 2

Narrative Graphic Report on


Interests and Loans

Cheska B. Maniquis
H11-01

Ericka Cabrera (GenMath)


Jaylyn Sanchez (ICTLearn)
I. Overview of the Situational Problem

Arian wants to invest 150,000 php for 1 year. Three banks gave her an offer. At
Northsouth bank’s offer, her investment will earn 4.5% simple interest; At BPO
bank’s offer her investment will earn 4.5% interest compounded monthly while at
Chaynabank’s offer her investment will earn 5% interest compounded weekly.
Which bank offers a better return?

II. Definition of Terms


• Compound interest – an interest is added to the account at regular intervals, and
the sum becomes the new basis for computing interest.
• Simple interest – an interest that is computed on the principal and then added to
it.
• Principal amount – the amount of money borrowed or invested on the origin
date.
• Rate – the annual rate, it is usually in percent.
• Term – the amount of time in years the money is borrowed or invested; length of
time between the origin and maturity date.
• Frequency of conversions – the number of conversion periods in one year.
• Future value – the total amount of principal and interest in the future.

III. Organization of Data for Comparison


Name of Bank Northsouth Bank BPO Bank Chaynabank
Principal amount 150,000 php 150,000 php 150,000 php
4.5% 4.5% 5%
Interest Rate Simple interest Compounded Compounded
monthly weekly
Term 1 year 1 year 1 year
IV. Computation
Find the future value of her investment in each bank
a.) Northsouth Bank
Given:
Principal amount (P) = 150,000 php
Rate (r) = 4.5% or 0.045
Term (t) = 1 year
Future value (F) = ?
Formula: F= P(1+rt)

Solution:
F = 150,000 [1+(0.045)(1)]
F = 156,750 php

b.) BPO bank


Given:
Principal amount (P) = 150,000 php
Rate (r) = 4.5% or 0.045
Frequency of conversions (m) = 12
Term (t) = 1 year
Future value (F) = ?
𝑟𝑟
Formula: F= 𝑃𝑃 (1 + )𝑡𝑡𝑡𝑡
𝑚𝑚

Solution:
0.045 (1)(12)
F = 150,000 (1 + )
12
F = 156,890.97 php

c.) Chaynabank
Given:
Principal amount (P) = 150,000 php
Rate (r) = 5% or 0.05
Frequency of conversions (m) = 52
Term (t) = 1 year
Future value (F) = ?
𝑟𝑟
Formula: F= 𝑃𝑃 (1 + )𝑡𝑡𝑡𝑡
𝑚𝑚
Solution:
0.05 (1)(52)
F = 150,000 (1 + )
52
F = 157,686.88 php

V. Justification
Arian has given 3 different offers and in order to help Arian to choose the right offer,
we need to compute the future value of her investment on each bank. One bank offers a
simple interest, and two banks offer a compound interest. Simple and compound interest
is different from each other, the simple interest is computed on the principal amount and
it remains constant throughout the investment term, while the compound interest is
calculated on the principal amount and also on the accumulated interest of previous
periods and can thus be regarded as "interest on interest."
To solve this problem. First, we need to find the future value on each bank by following
the formula. At Northsouth bank since it is a simple interest, we just need to follow this
formula P(1 + rt) There are given values and we just need to substitute it. The principal
amount or the P is the amount of money that she wants to invest, which is the 150,000
php and the rate or the r is the annual rate that is usually in percent, which is the 4.5%
but you should always turn it into a decimal form when computing that’s why it will
become 0.045 and lastly is the term or the t, it is the amount of time in years the money
is invested so, obviously that is the 1 year . The easiest way to solve this is to use a
scientific calculator, but always double check what you type on the calculator to avoid
mistakes. The format should be like this: 150,000 [1+(0.045)(1)] therefore, Arian’s
investment will be 156,750 php if she invest it in Northsouth bank. Next, we need to solve
for the BPO bank’s offer. Since it is a compound interest, it has a different formula to find
𝑟𝑟
the future value and that is 𝑃𝑃 (1 + )𝑡𝑡𝑡𝑡 and just like in the first computation we also
𝑚𝑚
0.045 (1)(12)
need to substitute the given values in the equation, 150,000 (1 + ) . Thus,
12
Arian’s investment will be 156,890.97 php if she invests it in BPO bank. Lastly, we need to
solve for the Chaynabank’s offer. It is also a compound interest, so we have to do the
same formula that we used in solving the previous computation.
0.05 (1)(52)
150,000 (1 + ) , now the answer is 157,686.88 php thus, it will be the future
52
value of Arian’s investment if she invests in Chaynabank.
This will be the future value of Arian’s investment in each bank:
Northsouth bank = 156,750 php
BPO bank = 156,890.97
Chaynabank = 157,686.88 php

This solution proved what bank offers a better return, and that is Chaynabank’s offer
because if she invests in Chaynabank, her 150,000 php will be 157,686.88 php in return.
As the offer has a higher interest rate and it is also compounded every week.

VI. References
www.canva.com
www.investopedia.com
www.naturalreaders.com

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