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Amount at Changing Rates

When the interest rate changes during an investment


term, the final amount can be found by getting the
amount each time there is a change and then use this
amount as the principal for the new rate until there
is another change. It means that the amount at the
end of an interest rate becomes the principal at the
beginning of the next interest rate. In other words,
obtain first the amount at the previous interest rate
before applying the new interest rate.

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9. Arthur made a time deposit of Php250,000.00


for 180 days at 15% effective, then renewed it
for 90 days at 14% effective, and renewed it
again for 60 days at 14% effective. Find the
accumulated amount in 11 months. How much
was the interest Arthur received?

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converted semi annually. The rate then dropped


to 12% converted quarterly during the next y3
years and then went up to 13% converted
quarterly for the remainder of the term. What
was the final amount?

Exercises
1. Find the amount in 6 years if Php25,000.00 is
invested at 16% compounded semi annually in
the first 4 years and at 14% compounded
quarterly in the last 2 years.
2. A man invested Php150,000.00 for 10 years.
How much will be the final amount at the end of
10 years if the interest rate is 14% compounded
quarterly for the first 3 years, 12% compounded
semi annually for the next 4 years and 11%
compounded quarterly for the remaining 3
years.
3. Vince deposited Php100,000.00 in a bank that
gives 14% interest converted quarterly. How
much money would she have in 7 years and 6
months if the interest rate increased to 15%
converted quarterly 4 years later?
4. Find the accumulated amount if Php200,000.00
is invested at 15% converted semi annually for 5
years and then changed it to 14.5% converted
quarterly for the last two years.
5. An investment of Php300,000.00 earns 15%
effective for 2 years, then 14% compounded
semi-annually for 2 more years, then 13%
compounded quarterly for another 1 year. Find
the amount at the end of 5 years.
6. Paul made a deposit of Php250,000.00 in a bank
at 15% effective for 3 years, and then changed it
to 14% converted quarterly for the last 2 years.
Find the accumulated amount in 5 years.
7. On January 1, 2010 Carl invested
Php500,000.00. How much will she have in 5
years, if the 16% interest converted semi
annually is in effect until April 1, 2012 and 15%
converted quarterly in the remaining years?
8. Php50,000.00 was invested for 6 years. During
the first 2 years, the interest rate was 12.5%

Continuous compounding
In
actual
business
practice,
continuous
compounding is seldom practiced, although some
banks and savings and loan associations try to
attract depositors by advertising frequent
compounding like the Interest araw-awar
advertisement. Daily compounding may make a
good advertising copy but does not mean much to
the depositors in terms of income as shown on the
table below.
Nominal rate, j
(at 5%
compounded)
Annually
Semi annually
Quarterly
Monthly
Weekly
Daily
Hourly
Continuous

Frequency of
conversion

A years interest
on Php10,000

1
2
4
12
52
365
8760
Continuously

Php 500.00
506.25
509.45
511.62
512.46
512.67
512.71
512.71

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Amount of
Php10,000 at the
end of 1 year
10,500.00
10,506.25
10,509.45
10,511.62
10,512.46
10,512.67
10,512.71
10,512.71

P Fe jt

Exercises:
1. Find the accumulated value of Php50,000 at the
end of 5 years if it is invested at 12% converted
continuously.
2. Find the present value of Php90,000.00 due in 4
years at 10% converted continuously.
3. Find the present value of Php190,000.00 due in
5 years if money is worth 14% compounded
continuously.
4. If Php28,500.00 is the amount at the end of 4
years, find its present value if it was invested at
11.5% compounded (a) semi annually, 9b)
quarterly, (c) monthly and (d) continuously.
5. If money is worth 14% find the final compound
amount if it is compounded continuously for 2
years.

6. Find the accumulated value of Php100,000.00


due in 5 years if money is worth 14%
compounded continuously.
7. Php75,000.00 is the amount due at the end of
4.5 years invested at 14% compounded
continuously. Find the present value.
8. Find the amount of Php40,000.00 if invested at
12% compounded (a) annually, (b) semi
annually, (c) quarterly, (d) monthly and (e)
continuously.
9. Find the present value of Php31,000.00 due in 3
years at 12% compounded continuously.

Find the interest rate and the time

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9. Find the nominal rate of interest converted


monthly at which Php92,000.00 accumulates of
Php160,000.00 in 5 years.
10. A man puts Php100,000.00 in a savings account
that pays 13% interest converted semi annually.
If he decides to withdraw his money when it
grows to Php150,000.00, when should he
withdraw his money?

Exercises
1. How long will it take Php20,000.00 to amount
to Php35,000.00 at 9% compounded quarterly?
2. What nominal rate, j, converted annually was
the interest if Php100,000.00 accumulates to
Php200,000.00 in 10 years?
3. A man invested Php150,000.00 on his childs
birth. If he wishes to double the amount he
invested after 7 years, at what rate converted
quarterly should he invest?
4. If Php40,000.00 accumulates to Php100,000.00
in 6 years, find the nominal rate converted semi
annually.
5. For the sum of money to double itself in 15
years, what must be the rate of interest
converted annually?
6. If Php50,000.00 earned an interest of
Php10,000.00 in 2 years, what must be the
interest rate converted monthly in which the
money was invested?
7. What nominal rate converted semi annually will
make
Php200,000.00
accumulate
to
Php500,000.00 in 8 years?
8. If php100,000.00 amounts to Php140,000.00 in
5 years with interest compounded quarterly,
what is the nominal rate of interest?

11. How long will the principal amount double


itself if the interest rate is 15% compounded
semi annually?
12. On January 15, 2016 Arthur has Php200,000.00
in a fund which earns interest at 14%
compounded quarterly. He plans to go into a
business as soon as the fund contains
Php250,000.00. On what date will that amount
be available?
13. Nancy received a loan of Php200,000.00 from
Maylene with interest at 10% converted
quarterly. She promised to pay Maylene in full
on the day when Php360,000.00 will be due.
When should Nancy pay?
14. A child 10 years old is left with Php300,000.00.
If it is invested at 16% compounded semi
annually, how old will he be at the time when it
amounts to Php3,000,000.00?
15. How long will it take an investment to increase
to at least 50% in peso value if the interest rate
is 12% converted annually?
16. A man invested Php100,000.00 at 15%
converted semi annually on June 1, 2007. On
what date will this amount have at least
Php200,000.00 in it?
17. How long will it take for Php80,000.00 to

amount to Php100,000.00 at 16% converted


semi annually?

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