MAT 152: Mathematics in the Modern World

Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson Title: Calculating Present and Future value at Materials:

Compound Interest Student Activity Sheet, Calculator

Lesson Objectives: At the end of this module, you should be References:

able to: Mathematics of Investment, 2nd edition,
1. Compute compound amount and compound interest. by Rogelio M. Hernandez, et al 2.
Solve problems involving present value and future value. http://mathworld.wolfram.com
http://www.basic-mathematics.com

Productivity Tip: Keep an ongoing list of every single thing you have to do. Write down every single thing you
need to do: assignments, projects, errands, etc. Review the list daily to ensure that you’re working on the most
important task at any given time. By doing this, you’ll become a far more organized student.

A. LESSON PREVIEW/REVIEW

Introduction

When people think of interest, they often think of debt. But interest can work in your favor when you're
earning it on money you've saved and invested. Compound interest can be both a blessing and a curse.
Compound Interest will make a deposit or loan grow at a faster rate than simple interest. When you start off
with a sum of money, but over the passage of time, interest is added. This applies to both deposits of money
(anywhere you put your money such as investments or savings) and loans of money. In this lesson, we break
down the process of computation of the compound interest and discuss bank scenarios for further
understanding of the topic. Let’s start now! (to save).

B. MAIN LESSON

Content Notes

Illustrating Compound Interest

Say you borrowed ₱300 from a friend today and he will collect the payment after 4 days and giving you 2%
compound interest per day. How much will you pay after 4 days? (Round-off to 2 decimal values.) Solution:
Day1 Day2 Day3 Day4
300 x 0.02 = 6 306 x 0.02 = 6.12 312.12 x 0.02 = 6.24 318.36 x 0.02 = 6.38
300 + 6 = 306 306 + 6.12 = 312.12 312.12 + 6.24 = 318.36 318.36 + 306.38 = 324.74
Therefore, the amount will be approximately ₱324.74 after 4 days.

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
What if you forget to pay on the fourth day? You only remember when you met your friend 7 days after you
borrowed the money? Your friend says that the same interest per day will be applied to the compounded value.
Thus, how much will you pay after 7 days? Write your solutions in the columns below.

Day5 Day6 Day7

“Check your answers against the Key to Corrections found at the end of this SAS.
Write your score on your paper.”

Compound Interest (or compounding interest) is calculated on the initial principal, which also includes all of
the accumulated interest of previous periods of a deposit or loan. Thought to have originated in 17th century
Italy, compound interest can be thought of as “interest on interest,” and will make a sum grow at a faster rate
than simple interest, which is calculated only on the principal amount.
The mathematical formula for
calculating compound interest depends
on several factors. These factors include
the amount of money
deposited called the principal, the annual
interest rate (in decimal form), the
number of times the money is
compounded per year, and the number
of years the money is left in the bank.
The amount payable is called the future
value (A).

Try the next problem! Solve by yourself by using the compound interest formula:

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Problem #2. If you deposit ₱6500 into an account paying 8% annual interest compounded monthly, how much
money will be in the account after 7 years?

“Check your answers against the Key to Corrections found at the end of this SAS.
Write your score on your paper.”

Skill-building Activities

PART A: Compute the Future Value for each amount with given rates and time. For numbers 1 to 5 the
amount is compounded annually while number 6 to 10 is compounded monthly. Use the back pages of the
module for the solution. Number 1 is done for you.

# P (php) r (per annum) time A (php)

1 110,000 2.1% 4 years 𝐴 = 110,000(1 + 0.021)4 = 119,535.16
2 82,000 6.1% 6 years
3 58,500 1.5.% 8 years
4 21,310 4.4% 3 years
5 9,244 0.8% 11 months
6 2,838 3.0% 7 years
7 177,000 3.6% 18 months
8 58,580 4.5% 4 months
9 92,310 2.4% 3 years
10 29,244 1.8% 9 years
“Check your answers against the Key to Corrections found at the end of this SAS.
Write your score on your paper.”

PART B: Solve at least four problems. Use the back part of this paper for the solution.

1. Find the present value of ₱50,000 due in 4 years if money is worth 12% compound semi-annually.

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
2. Find the present value of P1, 200 due in 3 years and 9 months if money is worth 10% compounded
quarterly?

3. How long will it take P15, 000 to accumulate to P25, 000 at 9% compounded monthly?

4. Accumulate P100, 000 for 15 years if the interest rate is 8% compounded quarterly for the first ten
years and 9% compounded monthly for the remaining five years. Find the compound amount at the end
of 15 years?

5. Find the compound amount at the end of eight years if P40,000 is invested at 8.5% compounded
monthly for the first two years and at 6 ½ % compounded quarterly for the remaining years.

“Check your answers against the Key to Corrections found at the end of this SAS.
Write your score on your paper.”

Check for Understanding

Short Quiz: Solve for the following problems using compound interest formula.
1. A certificate of deposit (CD) is a savings instrument that many banks offer. It usually gives a higher interest
rate, but you cannot access your investment for a specified length of time. Suppose you deposit $3000 in a
CD paying 6% interest, compounded monthly. How much will you have in the account after 20 years?

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
2. Suppose Carlo has ₱34,500 to invest but wants ₱40,000 for a new pair of branded rubber shoes. He finds a
bank offering 5.25% interest per annum, compounded quarterly. How long will he have to leave his money in
the account to have ₱40,000?

3. If you start a bank account with $33,000 and your bank compounds the interest quarterly at an interest rate
of 8% per annum, how much money do you have at the year's end ? (assume that you do not add or
withdraw any money from the account).

“Check your answers against the Key to Corrections found at the end of this SAS.
Write your score on your paper.”

C. LESSON WRAP-UP

Frequency Asked Questions

1) Is compound interest good or bad?
If you have a savings or investment account, its money you earn from your interest. That's
a good thing. If your loan has compound interest, it's interest that's charged on your
interest. That's a bad thing.

2) Who pays compound interest?

Credit cards, car loans are paid in compound interests. You can also earn compounded
interest in money market accounts and certificates of deposit (CDs). Many bonds pay fixed
interest sums, but some, such as zero coupon bonds, incorporate compounded growth.

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
3) What are the important factors to consider for compound interest?
 Compound interest (or compounding interest) is interest calculated on the initial principal, which
also includes all of the accumulated interest of previous periods of a deposit or loan.
 Compound interest is calculated by multiplying the initial principal amount by one plus the
annual interest rate raised to the number of compound periods minus one
 Interest can be compounded on any given frequency schedule, from continuous to daily to
annually.
 When calculating compound interest, the number of compounding periods makes a significant
difference.

4) What are the transpositions of the compound interest formula?

Think about your Learning

Was the lesson interesting? Let’s talk about your learning experience.

1. What do you think will help you sustain or improve your effort and output for the next session?
_________________________________________________________________________________
_________________________________________________________________________________

2. What did you like about this lesson? Why did it make you feel this way? How did this feeling affect
your work?
_________________________________________________________________________________
_________________________________________________________________________________

This document is the property of PHINMA EDUCATION

 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

KEY TO CORRECTIONS

Activity 2*: Illustrating Compound Interest (3 points each)

Sample Problem #2 (3 points each)

Skill-building Activities (5 points each)

PART A.

# P (php) r (per annum) time A (php)

1 110,000 2.1% 4 years 𝐴 = 110,000(1 + 0.021)4 = 119,535.16
2 82,000 6.1% 6 years 116,978.53
3 58,500 1.5.% 8 years 65,899.82
4 21,310 4.4% 3 years 24,248.50
5 9,244 0.8% 11 months (11 mo. = 11⁄12 yr) 10,171.50
6 2,838 3.0% 7 years 3,500.26
7 177,000 3.6% 18 months (18mo = 1.5yr) 186,805.67
8 58,580 4.5% 4 months ( t = ⁄12 yr)
4
59,286.13
9 92,310 2.4% 3 years 99,194.30
10 29,244 1.8% 9 years 34,382.68

PART B. Solve for the following problems using compound interest formula.

1.) A = Future Value = P 50,000

P = Present Value = ?
Rate = interest rate = 0.12

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 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
n = Compounding period = 2 (semi-annually)
t = years = 4
50,000 = P (1 + 0.12/2)⁽⁴⁾⁽²⁾
P = 50,000 / (1 + 0.06)⁸
P = 50,000 /1.5938
P = 31,371.57 or P 31,372.00
The present value is P 31,372.00.

2.)

3.)

4.)

5.)

Check for Understanding (5 points each)

1. P = $3000 the initial deposit

r = 0.06 6% annual rate
k = 12 12 months in 1 year
N = 20 since we’re looking for how much we’ll have after 20 years

0.06 20 𝑥 12
𝑃 = 3000 (1 + 12
) = $9930.61

This document is the property of PHINMA EDUCATION

 MAT 152: Mathematics in the Modern World
Module #16 Student Activity Sheet

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________
40000
log
34500
2. 𝑡= 0.0525 = 2.84 years
4 log(1+ 4 )
0.08 4 𝑥 1
3. 𝑃= 33000 (1 + 4 ) = $35,720.26

Suggested videos/sites only:

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
https://www.investopedia.com/terms/c/compoundinterest.asp
https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/compound-
interesttutorial/v/introduction-to-compound-interest

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