Term 3 · Week 1 · Compound Interest

Standard problem

Standard

A one-year time deposit of ₱50,000 earns 4% per year. Interest is subject to 20% final withholding tax. How much interest does the saver actually receive?

Show step-by-step solution

Answer: 1600 ₱

Gross interest: $50{,}000 \times 0.04 = 2{,}000$ .
Tax: $0.20 \times 2{,}000 = 400$ .
Net interest: $2{,}000 - 400 = 1{,}600$ pesos.

Common errors to watch for

Forgetting the 20% tax gives ₱2,000.
Taxing the principal instead of the interest.

Budget of Work competencies

gm11.t3.w1.c1
Solve problems involving compound interest, including maturity value, future value, nominal rates, and number of terms.
gm11.t1.w1.c2
Apply a percentage increase or decrease in various contexts: