Note: n and i refer to the same unit of time

I = Pin
Solution:
n = (months * 30days/month) + days
n = (8*30)+23
n = 263/360

I = Pin
I = 950 * 0.12 * (263/360)
I = P83.28
 I = Pin
Solution:
n=?
Jan 10-31 = 21 (excluding Jan 10)
February = 29
March = 31
April = 30
May = 31
June = 30
July = 31
August = 31
Sept. = 30
Oct. = 28 (including Oct. 28)
n = 292 days / 366 days
I = 800 * 0.16 * (292/366)
I =P102.12
 I = Pin
I = 125,000 * 0.05 * (4)
I = P 25,000
F=P+I
F = 125,000 + 25,000
F = 150,000

Another Solution:
F = P (1 + in)
F = 125,000( 1 + (0.05*4))
F = P150,000
First Interest Period
I1 = Pi
F1 = P + Pi
F1 = P (1 +i)
Second Interest Period
I2 = F 1 i
I2 = (P(1+i)) * i
I2 = Pi (1 +i)
F2 = F 1 + I 2
F2 = P + I 1 + I 2
Third Interest Period
I3 = F 2 i
I3 = (P+ I1 + I2)i
I3 = (P+Pi+(Pi(1+i)))i
I3 = Pi (1+i)2
F3 = F 2 + I 3
F3 = P + I 1 + I 2 + I 3
600

500

168.75
400

Interest
300 112.5 Principal

200 75

50 50 50 50 50

100

0
First Second Third Fourth First Second Third Fourth
COMPOUND
F = P(1+i)n
F = 10,000 (1 + 0.06) 12
F = P20,121.96

SIMPLE
F = P(1+in)
F = 10,000 (1 + (0.06*12))
F = P17,200
F = P(1+i)n
F = 10,000 (1 + 0.06) 12
F = P20,121.96

Compounding Period per Year

Nominal Rate of Interest
Specifies the rate of interest and number
of interest periods in a year.

m=number of
Frequency compounding period
per year
Annual 1
Quarterly 4
Monthly 12
Daily 365
 F = P(1+i)n
Nominal Rate of Interest
i=r/m r=nominal interest rate
m=number of compounding
period per year
F = P(1+(r/m))n*m
F = 10,000 (1 +(0.06/4)) 12*4
F = P20,434.78 m=quarterly
F = P20,121.96 m=annually
F = 10,000 (1 +(0.06/12)) 12*12
F = P20,507.51 m=monthly
F = P(1+i)n r=nominal interest rate
m=number of compounding
i=r/m period per year
n=m*t t=number of years

F = P(1+(r/m))m*t
F = 10,000 (1 +(0.06/4)) 12*4
F = P20,434.78 m=quarterly
F = 10,000 (1 +(0.06/1)) 12*1
F = P20,121.96 m=annually
F = 10,000 (1 +(0.06/12)) 12*12
F = P20,507.51 m=monthly
F = P(1+(r/m))m*t
F = 1,000 (1 +(0.10/1)) 1*5
F = P1,610.51 m=annually
F = 1,000 (1 +(0.10/2)) 2*5
F = P1,628.89 m=semiannually
F = 1,000 (1 +(0.10/4)) 4*5
F = P1,638.62 m=quarterly
F = 1,000 (1 +(0.10/12)) 12*5
F = P1,645.31 m=monthly
F = 1,000 (1 +(0.10/365)) 365*5
F = P1,648.61 m=daily
F = P(1+(r/m))m*t
75000 = 45000 (1 +(r/1)) 1*10
r=0.0524
r=5.24%
F = P(1+(r/m))m*t
r=0.05 F = 2P
m=1
t=?

F = P (1 +(r/m)) m*t
2P = P (1 +(0.05/1)) 1*t
2 = (1 +(0.05)) t
2 = (1.05) t
t = 14.21 years m=annually
t = 13.95 years m=quarterly
t = 13.89 years m=monthly
F = Per*t
F = 3,927.54 (e) 0.055*30
F = P20,450.62
F = Per*t
P = 5300
F = 2P
t=8
2(5300) = 5300 (e) r*8
r=0.08664
r=8.7%
F = P(1+(r/m))m*t F = 1,000 (1 +(0.06/4)) 1*4
F = 1061.36
ER = I/P ER= (1061.36-1000)/1000
ER= 0.06136
ER= 6.136%
ER = (1+(r/m)) m -1 ER= (1+(0.06/4) -1
4

ER= 0.06136 = 6.136%

ER = (e) r -1 ER= (e) 0.06 -1

ER= 0.061836 = 6.1836%
*Two nominal rates are equal if they have
the same effective rates

ERQ =
(1+(0.10/4)ER
4
-1 M= (1+(r/12) 12 -1
r= 0.09918 = 9.918%

*Thus, 10% compounded quarterly will have the same

interest as 9.918% compounded monthly

P=1000
10%, quarterly 9.918%, monthly
F=1103.812891 F=1103.815024
 P100

F0
5

1 2 3 4

F = 100( 1 + (0.10*5)) P150

F = 150
 12,000
15,00015,000 15,000 15,000
15,000

3,000 3,000 3,000 3,000 3,000

30,000
 24,000

12,000 12,000 12,000 12,000

30,000
 F0 F = P(1+(r/m))m*t
B = F0 + F2 -F5
F2
B = 1,500(1+(0.09/1)) 1*6
+ 3,000(1+(0.09/1)) 1*4
3,000 - 5,000(1+(0.09/1)) 1*1
1,500
B =1,300.39
0 1 2 3 4 5 6

5,000

F5
ANNUI
TY
ANNUIT :Apayments
series of uniform
made at equal
Y 1. Ordinary Annuity
interval of time.

2. Deferred Annuity
3. Annuity Due
4. Perpetuity
0 1 2 3 4 5 6 7 8 9 n

A A A A A A A A A A
 TO
GIVEN FACTOR FACTOR NAME FACTOR SYMBOL
FIND
Single Payment Compound
F P (F/P,i%,n)
Amount
Single Cash

Single Payment Present

P F (P/F,i%,n)
Flow

Worth

Uniform Series Compound

F A (F/A,i%,n)
Amount
P A Uniform Series Present Worth (P/A,i%,n)
Uniform Series
(Annuities)

A F Sinking Fund (A/F,i%,n)

A P Capital Recovery (A/P,i%,n)

 COMPOUNDING CONTINUOUSLY
TO
GIVEN FACTOR FACTOR NAME FACTOR SYMBOL
FIND
Continuous Compounding
F P (F/P,r%,t)
Compound Amount
Single Cash

Continuous Compounding
P F (P/F,r%,t)
Flow

Present Equivalent

Continuous Compounding
F A (F/A,r%,t)
Compound Amount
Continuous Compounding
P A (P/A,r%,t)
Present Equivalent
Uniform Series

Continuous Compounding
A F (A/F,r%,t)
(Annuities)

Sinking Fund
Continuous Compounding
A P (A/P,r%,t)
Capital Recovery
 @Present Worth
(𝟏+𝟎 . 𝟏𝟓)𝟏𝟎 −𝟏
P = A(P/A,15%,10) P = 10,000 *
𝟎 .𝟏𝟓 (𝟏+𝟎 . 𝟏𝟓) 𝟏𝟎
10k (P/A, 15%, 10)
(𝟏+ 𝒊)𝒏 − 𝟏 P = 50,187.69
i (𝟏+𝒊) 𝒏
0 1 2 3 4 5 6 9 10

10k 10k 10k 10k 10k 10k 10k 10k

 @Present Worth
(𝟏+𝟎 . 𝟏𝟓) 𝟏𝟎 −𝟏
P = A(P/A,15%,10) P = 10,000 *
𝟎 .𝟏𝟓 (𝟏+𝟎 . 𝟏𝟓) 𝟏𝟎
10k (F/A, 15%, 10)
(𝟏+ 𝒊)𝒏 − 𝟏 P = 50,187.69
i (𝟏+𝒊) 𝒏
0 1 2 3 4 5 6 9 10 @Accumulated Amount
(𝟏+ 𝟎 .𝟏𝟓) 𝟏𝟎 − 1
F = A(F/A,15%,10) F = 10,000 * 𝟎 .𝟏𝟓
10k 10k 10k 10k 10k 10k 10k 10k (𝟏 + 𝒊 )𝒏 − 1 F = 203,037.18
i
0 1 2 3 4 5 6 7 8 9 n

A A A A A A A
 GIVEN: A = 10,000
F25 i = 12/1
(𝟏 + 𝒊 )𝒏 − 1
SOLUTION:
10k (F22/A, 12%, 5) (F25/P, 12%, 3) i
@ F22
F22 = 10,000 (F22/A, 12%, 5)
10k 10k 10k 10k 10k
(𝟏+ 𝟎 .𝟏𝟐) 5 − 1
F22 = 10,000 * 𝟎 .𝟏𝟐
F22 = 63,528.47
16 17 18 19 20 21 22 23 24 25
@ F25 (𝟏+ 𝒊)𝒏
F25= 63,528.47 (F25/P, 12%, 3)
F25= 63,528.47 (1.4049)
F25= 89,252.93
0 1 2 3 4 5 6 7 8 9 n

A A A A A A A A A A A
 FIRST BID
P= 400,000 (P/A, 20%, 4) + 400,000
P= 400,000 (2.5888734568) + 400,000
P= 1,435,493.827

0 1 2 3 4 5

400k 400k 400k 400k 400k

400k (P/A, 20%, 4)

 FIRST BID
P= 400,000 (P/A, 20%, 4) + 400,000
P= 400,000 (2.5888734568) + 400,000
P= 1,435,493.827

0 1 2 3 4 5 SECOND BID
P= 540,000 (P/A, 20%, 3)(P/F,20%,1)
+360,000(P/F,20%,1) + 240,000
240k P= 540,000 (2.1065)(0.8333)
360k
(P/F, 20%, 1)
+360,000(0.8333) + 240,000
540k 540k 540k P= 1,487,875

540k (P/A, 20%, 3)

(P/F, 20%, 1)
 P = A/i

0 1 2 3 4 5 6 7 n-1 n

A A A A A A A A A A
 P=30,000 (P/A, 15%,6)
(P/F, 15%, 12) 50,000/0.15 +40,000(P/A,15%,6)(P/F,15%,6)
+(50,000/0.15)(P/F,15%,12)
(P/F, 15%, 6) 40k (P/A, 15%, 6) 50k 50k 50k
P=30,000 (3.7845)
30k (P/A, 15%, 6) 40k 40k 40k +40,000(3.7845)(0.4323)
+(50,000/0.15)(0.1869)
30k 30k 30k
P= 241,277
0 1 2 6 7 8 12 13 14