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Term 3 · Week 1 · Compound Interest

Challenge problem · non-routine

Challenge Non-routine

An investment grew from ₱10,000 to ₱12,000 in 3 years with annual compounding. Find the annual rate, in percent, to two decimal places.

Show step-by-step solution

Answer: 6.27 %

  1. 12,000=10,000(1+r)3⇒(1+r)3=1.212{,}000 = 10{,}000(1+r)^3 \Rightarrow (1+r)^3 = 1.2.
  2. 1+r=1.21/3≈1.06271 + r = 1.2^{1/3} \approx 1.0627.
  3. r≈0.0627=6.27%r \approx 0.0627 = 6.27\%.

Common errors to watch for

  • Dividing the 20% total growth by 3 gives 6.67%, which ignores 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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