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1) Find the compound amount and interest on Php50,000 invested for 10 years at 5
1) Find the compound amount and interest on Php50,000 invested for 10 years at 5.5% interest compounded
semi-annually.
2. On the birth of his son Zachary, Brian deposited Php120,000 in a trust fund that pays 3.5% interest
compounded monthly. How much money is in the trust fund when Zachary reaches his 18th birthday?
6. Leslie and Mackoy both opened a savings account with a starting balance of Php20,000 on the first day of
January. Leslie’s bank is paying her a simple interest of 7% annually. Mackoy’s bank is paying him an interest
of 7% compounded annually. Who has a bigger balance at the end of 5 years?
Expert Solution
We can calculate the desired result as follows:
1) Amount Invested = Php 50,000
Period = 10 years
Interest = 5.5% Compounded Semi Annually
We can calculate the compound amount and interest as follows:
= Amount Invested * ( 1 + Rate / 2) ^ (Period * 2)
= 50000 * (1 + 0.055 / 2) ^ (10 * 2)
= Php 86,021.42
Interest Earned = Amount received - Amount Invested
= 86,021.42 - 50,000
= Php 36,021.42
2) Amount Invested = Php 120,000
Period = 18 years
Interest = 3.5% Compounded Monthly
Amount received after 18 years is:
= Amount Invested * ( 1 + Rate / 12) ^ (Period *12)
= 120000 * (1+0.035/12) ^ (18*12)
= Php 225,106.76
3) Simple Interest is the interest which remains constant and simply adds to the principal amount each year. Compound Interest on the other hand is the interest which adds up on interest earned each year also. So, the amount which is invested for 5 years at 7% compounded annually will end up with greater balance which can be calculated as below:
Amount Invested = Php 20,000
Period = 5 years
Interest = 7%
When simple interest is earned :
= 20000 + (20,000 * 5 * 7%)
= 20,000 + 7,000
= Php 27,000
When Compound Interest is earned:
= 20000 * (1+0.07) ^ (5)
= Php 28,051.03
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