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Term 3 · Week 1 · Compound Interest

Standard problem

Standard

How much interest is earned on ₱20,000 invested at 5% compounded semi-annually for 2 years?

Show step-by-step solution

Answer: 2076.26 ₱

  1. i=0.025i = 0.025, n=4n = 4.
  2. F=20,000×1.0254≈20,000×1.103813=22,076.26F = 20{,}000 \times 1.025^4 \approx 20{,}000 \times 1.103813 = 22{,}076.26.
  3. Interest =F−P=22,076.26−20,000=2,076.26= F - P = 22{,}076.26 - 20{,}000 = 2{,}076.26.

Common errors to watch for

  • Reporting the maturity value instead of the interest earned.

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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