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Term 3 · Week 1 · Compound Interest

Standard problem

Standard

₱20,000 is invested at 8% per year compounded quarterly for 2 years. Find the maturity value to the nearest centavo.

Show step-by-step solution

Answer: 23433.19 ₱

  1. Quarterly rate i=0.08/4=0.02i = 0.08/4 = 0.02; number of periods n=2×4=8n = 2 \times 4 = 8.
  2. A=20,000(1.02)8≈20,000×1.171659A = 20{,}000(1.02)^8 \approx 20{,}000 \times 1.171659.
  3. A≈23,433.19A \approx 23{,}433.19 pesos.

Common errors to watch for

  • Using n=2n=2 with the 8% annual rate (ignores quarterly compounding).

Budget of Work competencies

  • gm11.t3.w1.c1
    Solve problems involving compound interest, including maturity value, future value, nominal rates, and number of terms.

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