Formula:

InTeresT period : The lengTh of Time in which inTeresT is calculaTed. Frequency of conversions, m : The number of Times inTeresT is calculaTed in a year. Periodic inTeresT rate i : The inTeresT raTe for each inTeresT period Number of inTeresT periods n : The number of Times inTeresT is calculaTed n=mt where m = frequency of conversions t = The invesTmenT periods in years MAY 2021 WS CH 4.2 : COMPOUND INTEREST 4 Simple interest : based on the original principal Compound interest I : based on the principal which grows from one interest interval to another Compound amount 5: also called as accumulated amount / future value Original principal P :original amount invested Annual nominal rate j : the interest rate for a year together with the frequency at which interest is calculated in a year MY 7H?'l W9 (H4 )3 'COMPOUNDINTFRFQT Q TUTORIALS : COMPOUND INTEREST Find the future values of the following investments. i. RMZODOO at 5% annually for 5 years. ii. RM40,000 at 6% semiannualiy for 6 years 6 months. iii. RM10,500 at 8% quarterly for 2% years. iv. RM100,000 at 5% monthly for 3% years. v. RM50.000 at 12% every 4 months for 6 years. Suppose RM2000 is invested at an annual interest rate of 5%. Compute the amount accumulated after 20 years ifthe interest is i. Simple interest ii. Compounded monthly Calculate the difference between the accumulated values in the two cases above. What is the nominal rate compounded monthly that will make RM1000 become RM20,000 in ve years? Find the sum to be invested now at 6% monthly to accumulate RM10000 in ve years. A computer is estimated to cost RM4000 in two years' time. If Abu wishes to buy it, how much must he save now in an account that pays 12% every four months? Ho saved RM25000 at 8% monthly. Two years later, he withdrew RM15,000 from his savings. Find the amount left in his account. A debt of RM600 due in three years and RM800 due in four years is to be repaid by a single payment two years from now. If the interest rate is 8% semiannually. how much is the payment? Answers: 1) RM25525.63. RM58741.35. RM13055.43. RM117605.12, RM101.290.83 2) RM4000.00. RM5425.28, RM1425.28 3) 61.43% 4) RM7413.72 5) RM3161.26 6) RM14322.20 7) RM1238.58 COMPOUND INTEREST For an original principal of P, the compound amount S at the end of n interest period is S = P(1+in where P =original principal (original amount invested) i =periodic interest rate/interest rate per interest period n =number of interest periods in the investment period S =compound amount after n interest periods Compound interest I : the difference between compound amount & original principal I =S-P MAY 2021 WS CH 4.2 : COMPOUND INTEREST