Answer to Question #175120 in Financial Math for Kim Galvez

Question

Solve the following problems. Show your solutions to support your answer.

1. At what rate will ₱ 6,500 accumulate to ₱ 27,000 for 3 years and 6 months, if compounded every 5 

months?

2. Accumulate ₱ 25,000 for 2 years and 5 months at 6 ½%, compounded every two months.

3. Briefly explain the difference between a “ 7% compounded monthly for a year” and a “7% simple 

interest for a year.”

Answer 1

$A=P(1+r/n)$ ^nt

^1.

$27000=6500(1+r/2.4)$^7.2

7.2 rt $(270/65)=(1+r/2.4)$

$r=0.524873784*100$

$r= 52.487$

2.

$A=25000(1+0.065/6)$^29/6

$A=25000\times1.053459511$

$A=26336.48777$

3.

$Compound interest=Amount-Principal$

Assuming principal = 1

$A=P(1+r/n)$^nt

$A=1(1+0.07/12)$¹²

$A=1.07229008$

Compound interest $= 1.07229008-1=0.07229008$

$Simple interest=P\times R \times T$

$=1 \times 0.07 \times 1=0.07$