BF - LESSON 4: LONG-TERM FINANCIAL CONCEPTS

BF - LESSON 4: LONG-TERM FINANCIAL CONCEPTS

SIMPLE INTEREST

FUTURE VALUE

FUTURE VALUE = PRINCIPAL ( 1 + RATE x TIME )

INTEREST = PRINCIPAL x RATE x TIME

PRESENT VALUE

PRESENT VALUE = FV / ( 1 + RATE x TIME )

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GIVEN 1: Principal is P10,000 with a rate of 1% and expected to mature after 5 years. Find the FUTURE VALUE using SIMPLE INTEREST METHOD

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GIVEN 2: Principal is P25,000 with a rate of 2% and expected to mature after 2 years. Find the INTEREST using SIMPLE INTEREST METHOD

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GIVEN 3: The money worth P12,500 earned an interest amounting to P1,500 after 4 years. Find the RATE if the money matured using SIMPLE INTEREST METHOD

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GIVEN 4: An investment with a rate of 4% matured to P16,800 after 3 years. Find the PRESENT VALUE of investment using SIMPLE INTEREST METHOD

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GIVEN 5: A will invest P30,000 in a bank earning 5% per annum. How long will it take for his investment to grow up to P31,500?

COMPOUND INTEREST

FUTURE VALUE

FUTURE VALUE = PRESENT VALUE (1 + RATE) ^ TIME

PRESENT VALUE

PRESENT VALUE = FUTURE VALUE / (1 + RATE) ^ TIME or

PRESENT VALUE = FUTURE VALUE (1 + RATE) ^ -TIME

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GIVEN 1: An investment worth P30,000 is set to mature for 2 years with a 1% interest rate. How much is the FUTURE VALUE under compound interest method?

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GIVEN 2: An investment worth P15,000 is set to mature for 3 years with a 2% interest rate. How much is the INTEREST under compound interest method?

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GIVEN 3: An investment worth P12,500 is set to mature for 4 years with a 3% interest rate. How much is the FUTURE VALUE under compound interest method?

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GIVEN 4: An investment matured to P30,416.32 after 5 years with a 4% interest rate. How much is the PRESENT VALUE under compound interest method?

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GIVEN 5: An investment matured to P13,400.96 after 6 years with a 5% interest rate. How much is the PRESENT VALUE under the compound interest method?

COMPOUND INTEREST

Compounding of interest can also be done monthly, quarterly, and semi-annually and if that is the case, the formula should be

Future Value = Principle x (1+i)^t

whereas:

i = rate / compounding of interest;

t = time x compounding of interest

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GIVEN: An investment amounting to P25,000.00 is set to mature after 2 years with a 15% interest rate. How much is the FUTURE if this will be compounded monthly?

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GIVEN: An investment amounting to P25,000.00 is set to mature after 2 years with a 15% interest rate. How much is the FUTURE if this will be compounded quarterly?

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GIVEN: An investment amounting to P25,000.00 is set to mature after 2 years with a 15% interest rate. How much is the FUTURE if this will be compounded semi-annually?

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A