1

Lcc|urc Scrics on Compound In|crcs| Lcc|urc Scrics on Compound In|crcs| Lcc|urc Scrics on Compound In|crcs| Lcc|urc Scrics on Compound In|crcs|
(Par|s Two and Thrcci (Par|s Two and Thrcci (Par|s Two and Thrcci (Par|s Two and Thrcci
Oc|obcr 1`, 17, S 20 2011
Ou|linc ol Prcscn|a|ion Ou|linc ol Prcscn|a|ion Ou|linc ol Prcscn|a|ion Ou|linc ol Prcscn|a|ion
Compound In|crcs|.
Accumula|in and Discoun|in.
Iindin Inknown Nominal Ra|c
Comparison ol Ra|cs
- Nominal vs. Lllcc|ivc
- Two Nominal Ra|cs
- Nominal vs. Simplc In|crcs|
- Nominal vs. Discoun| Ra|c
- Valucs ol Oblia|ion and |hcir Comparison
Lqua|ion ol Valucs
Iormula Rccap Iormula Rccap Iormula Rccap Iormula Rccap
Rccap ol
Iormulas
(2.1 |o 2.9i
) 1 log(
log log
or
) 1 log(
log
: 2.9 Formula
) 1 log(
log
: 2.8 Formula
1 : 2.7 Formula
1 : 2.6 Formula
) 1 ( or
) 1 (
: 2.5 Formula
: 2.4 Formula
) 1 ( : 2.3 Formula
: 2.2 Formula
: 2.1 Formula
1
1
i m
P F
t
i m
P
F
t
i
P
F
n
m
P
F
j
P
F
i
i F P
i
F
P
P F I
i P F
m
j
i
tm n
n
n
n
n
c
n
+

=
+
|
.
|

\
|
=
+
|
.
|

\
|
=
(
(

|
.
|

\
|
=
|
.
|

\
|
=
+ =
+
=
=
+ =
=
=

Comparison ol Nominal and Lllcc|ivc Ra|cs Comparison ol Nominal and Lllcc|ivc Ra|cs Comparison ol Nominal and Lllcc|ivc Ra|cs Comparison ol Nominal and Lllcc|ivc Ra|cs
Lllcc|ivc Ra|c (wi
- Thc ra|c a| which whcn compoundcd annuallv
is cquivalcn| |o a nominal ra|c compoundcd in
scvcral |imcs in a vcar
Iormula
interest earned in one year
w =
principal invested at the beginning of year
|o compu|c lor how much is carncd in lor onc vcar
Dcrivin Dcrivin Dcrivin Dcrivin w ww w
Il |hc prcscn| valuc or principal is invcs|cd lor onc
vcar a| an cllcc|ivc ra|c, |hc compound amoun|, I, I
I
L
P(1wi
Il |hc principal. P, is invcs|cd a| a nominal ra|c ,
compoundcd m |imcs a vcar, |hc compound amoun|
I, ob|aincd in | vcars is
Il | 1 vcar, n m, |hcn |hc abovc lormula bccomcs:
Iormula (2.10
n
N
m
j
P F |
.
|

\
|
+ = 1
n
N
m
j
P F |
.
|

\
|
+ = 1 Iormula (2.11
Dcrivin Dcrivin Dcrivin Dcrivin w ww w
To solvc lor w cquivalcn| |o , cqua|c Iormulas (2.10i
and (2.11i
1 1
equation the of side right the to 1 Transpose 1 ) 1 (
by sides both Divide 1 ) 1 (
|
.
|

\
|
+ =
|
.
|

\
|
+ = +
|
.
|

\
|
+ = +
=
m
m
m
N E
m
j
w
m
j
w
P
m
j
P w P
F F
Iormula (2.12
2
Dcrivin Dcrivin Dcrivin Dcrivin Lquivalcn| |o Lquivalcn| |o Lquivalcn| |o Lquivalcn| |o w ww w
1 ) 1 (
by sides both Multiply 1 ) 1 (
equation the of sides both to 1 - d Ad 1 1 1 ) 1 (
1 ) 1 (
1 ) 1 (
1
by equation the of sides both Raise 1 ) 1 (
by equation the of sides both Divide 1 ) 1 (
1
1
1
1
1
1
(

+ =
= +
|
.
|

\
|
+ = +
|
.
|

\
|
+ = +
(
(

|
.
|

\
|
+ = +
|
.
|

\
|
+ = +
|
.
|

\
|
+ = +
=
w
w
m
m
m m
m
m
m
j w
w m j
m
m
j
w
m
j
w
m
j
w
m
j
w
m m
j
w
P
m
j
P w P
F F
Iormula (2.1`
Comparison ol Two Nominal Ra|cs Comparison ol Two Nominal Ra|cs Comparison ol Two Nominal Ra|cs Comparison ol Two Nominal Ra|cs
Two ra|cs arc cquivalcn| il |hcv producc |hc samc
compound amoun| lor |hc samc span ol |imc
Lc| P bc |hc principal |o bc invcs|mcn| a| |hc |wo
nominal ra|cs,
1
and
2
, lor a ivcn |imc |. Ior
1
|o bc
cquivalcn| |o
2
, |hcir compound amoun|s mus| bc
cqual:
2 1
2 1
1 1
1 1
2 1
2
2
1
1
2
2
1
1
2 1
2 1
n
2 2
n
1 1 2 1
1 1
: becomes equation above the and then year, 1 If
1 1
to Substitute ) 1 ( ) 1 (
by sides both Divide ) 1 ( ) 1 (
) P(1 F and ) P(1 F e wher
m m
n n
n n
n n
m
j
m
j
m n t
m
j
m
j
i
m
j
i i
P i P i P
i i F F
|
|
.
|

\
|
+ =
|
|
.
|

\
|
+
= =
|
|
.
|

\
|
+ =
|
|
.
|

\
|
+
+ = +
+ = +
+ = + = =
Iormula (2.15
Iormula (2.14
Dcrivin Dcrivin Dcrivin Dcrivin
1 11 1
(
(
(

|
|
.
|

\
|
+ =
(
(
(

|
|
.
|

\
|
+ =

|
|
.
|

\
|
+ =
|
|
.
|

\
|
+ = +
|
|
.
|

\
|
+ =
|
|
.
|

\
|
+
1 1 j
1 1 j
by equation the of sides both Multiply 1 1
equation the of sides both to 1 - Add 1
m
j
1
2.15 Formula 1 1
2
1
1
2 2
1
2
2
1 1
1
1
2
1
1
2
2
1
1
2
2
1
1
1
2
1
2
1
2
2 1
m
m
m
m
m
m
m
m m
m
j
m
m
j
m
m
m
j
m
j
m
j
m
j
m
j
m
Iormula (2.16
Iormula (2.17
Lxamplc 2.9 Lxamplc 2.9 Lxamplc 2.9 Lxamplc 2.9
An invcs|or was ollcrcd bv Bank A, 5.0
compoundcd scmi-annuallv lor his invcs|mcn|.
Bank B ollcrs 4.5 compoundcd mon|hlv lor |hc
samc invcs|mcn|. Il vou arc |hc invcs|or, in which
bank would vou prclcr |o invcs| vour moncv.
Givcn: Bank A: 5.0 (m2i
Bank B: 4.5 (m12i
Rcquircd: Bank whcrc |hc invcs|or mus| invcs| his
moncv
Lxamplc 2.9 Solu|ion Lxamplc 2.9 Solu|ion Lxamplc 2.9 Solu|ion Lxamplc 2.9 Solu|ion
A B
A
B
m
B
B
B
A
A
m
A
A
A
w w
w
w
m
j
w
w
w
m
j
w
B
A
<
=
|
.
|

\
|
+ =

|
|
.
|

\
|
+ =
=
|
.
|

\
|
+ =

|
|
.
|

\
|
+ =
since A Bank in Invest
% .59 4 or 0459 . 0
1
12
045 . 0
1
1 1 : B Bank
% 06 . 5 or 0506 . 0
1
2
05 . 0
1
1 1 : A Bank
12
2
Comparison ol Nominal Ra|c and Simplc In|crcs| Ra|c Comparison ol Nominal Ra|c and Simplc In|crcs| Ra|c Comparison ol Nominal Ra|c and Simplc In|crcs| Ra|c Comparison ol Nominal Ra|c and Simplc In|crcs| Ra|c
(

+ =
= |
.
|

\
|
+ =
|
.
|

\
|
+
=
|
.
|

\
|
+ =
|
.
|

\
|
+ = +
|
.
|

\
|
+ = +
+ = +
=
1 ) 1 (
year 1 t if 2.18, Formula From 1 1
1 1
by sides both Divide 1 1
sides both to 1 - Add 1 1 ) 1 (
by sides both Divide 1 ) 1 (
) 1 ( ) 1 (
F F
1
interest compound at interest simple at
n
m
n
n
n
n
n
rt m j
m
j
r
t
m
j
r
t
m
j
rt
m
j
rt
P
m
j
P rt P
i P rt P
Iormula (2.18
Iormula (2.19
Iormula (2.20
3
Lxamplc 2.11 Lxamplc 2.11 Lxamplc 2.11 Lxamplc 2.11
Vha| nominal ra|c
compoundcd scmi-
annuallv is cquivalcn|
|o `.5 simplc
in|crcs| ra|c in a `-
vcar |ransac|ion.
Solu|ion |o Lxamplc 2.11 Solu|ion |o Lxamplc 2.11 Solu|ion |o Lxamplc 2.11 Solu|ion |o Lxamplc 2.11
Givcn: r`.5; m2; |` vcars; n|m`(2i6
Rcquircd:
interest simple 3.5% to equivalent is
annually - semi compounded 3.36% of rate nominal The
3.36% or 0336 . 0
1 )) 3 ( 035 . 0 1 ( 2
1 ) 1 (
: Solution
6
1
1
=
(

+ =
(

+ =
j
j
rt m j
n
Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c
Simplify
1
1
1
1
1
by sides both Multiply
1
1
1
sides both to
1
1
- Add 1
1
1
equation the of sides both to Add 1
1
1
multiply Cross 1
) 1 (
1
P by sides both Divide 1
) 1 (
) 1 (
) 1 (

rate nominal a at rate discount simple at
(
(
(
(

|
.
|

\
|
+
=
|
.
|

\
|
+
=
|
.
|

\
|
+
=
|
.
|

\
|
+
+
=
|
.
|

\
|
+
|
.
|

\
|
+ =

|
.
|

\
|
+ =

+ =

=
n
n
n n
n
n
n
n
m
j t
d
t
m
j
dt
m
j
m
j
dt
dt dt
m
j
m
j
dt
m
j
P
dt
P
i P
dt
P
F F
Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c Comparison ol Nominal Ra|c and Discoun| Ra|c
m
n
n
n
m
j
m
j
d
m
j
t
m
j
d
|
.
|

\
|
+
|
.
|

\
|
+
=
=
|
.
|

\
|
+
|
.
|

\
|
+
=
1
1 1
as expressed be can 2.21 Formula year, 1 t If

1
1 1
as written be can d g, Simplifyin
Iormula (2.21
Iormula (2.22
Dcrivin |hc Nominal lrom |hc Discoun| Ra|c Dcrivin |hc Nominal lrom |hc Discoun| Ra|c Dcrivin |hc Nominal lrom |hc Discoun| Ra|c Dcrivin |hc Nominal lrom |hc Discoun| Ra|c
(
(

|
.
|

\
|

=
|
.
|

\
|
+ =

1
1
1

is formula resulting The given. is rate discount the
if rate nominal the derive can we , 1
1
equation the From
n
i
n
dt
m j
m
j
P
dt
P
Iormula (2.2`
Lxcrcisc 2.12 Lxcrcisc 2.12 Lxcrcisc 2.12 Lxcrcisc 2.12
Iind |hc simplc
discoun| ra|c |ha| is
cquivalcn| |o a
nominal ra|c ol
11.25 compoundcd
quar|crlv in a 1-vcar
|ransac|ion.
4
Answcr |o Lxcrcisc 2.12 Answcr |o Lxcrcisc 2.12 Answcr |o Lxcrcisc 2.12 Answcr |o Lxcrcisc 2.12
Givcn: 11.25; m4; |1 vcar; n(1i(4i4
Rcquircd: d
( )
rate. discount simple 10.50% to equivalent
is quarterly compounded 11.25% of rate nominal A : Answer
% 5 . 10 1050 . 0
4
1125 . 0
1 1
1
4
1125 . 0
1
1
1 1
: Solution
4
4
= =
|
.
|

\
|
+
|
.
|

\
|
+
=
|
.
|

\
|
+
|
.
|

\
|
+
=
n
n
m
j
t
m
j
d
Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork
Vha| nominal ra|c
compoundcd scmi-
annuallv is cquivalcn|
|o 10.0
compoundcd
mon|hlv.
Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc
No|c: Il problcm is silcn| on |, assumc |ha| | 1 vr.
Givcn: m
2
2;
2
0.10, m
2
12
Iind: m
1
Solu|ion:
1 2 m m
1 2
1 2
2 1 2
1
6
1 1
1
1
j j
1 1
m m
j 0 . 1 0
1 1
2 1 2
1
T o s i m p l i f y , y o u n e e d t o m u l t i p l y t h e e x p o n e n t b y
2
j j 0 . 1 0
1 + 1 = 1 + 1 . 0 5 1 0 5 3 3 1 3
2 1 2 2
j
0 . 5 1 1 5 3 3 1 3
2
j 0 . 1 0 2 1 0 6 6 2 6
R o
| | | |
+ = +
| |
\ . \ .
( (
| | | |
+ = + ( ( | |
\ . \ . ( (
| |
= + =
|
\ .
=
=
1
u n d i n g o f f t o 4 d e c i m a l p l a c e s ,
j 0 . 1 0 2 1, o r 1 0 . 2 1 % =
To Chcck To Chcck To Chcck To Chcck
1,104.71 P
12
0.10
1 1,000.00 P ) 1 (
Similarly,
1,104.71 P 0.05105) 1,000.00(1 P
05105 0
2
1021 0
where , ) 1 (
0.1021 or 21 10 2 2 : Given
1 and , 00 000 1 P assume s let' , 2 1 If
12
2
1
= |
.
|

\
|
+ = + =
= + =
= = + =
= = =
= =
n
n
i P F
F
.
.
i i P F
% . , j , n m
t . , F F
Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork
Vha| simplc in|crcs|
ra|c is cquivalcn| |o
5.25 compoundcd
quar|crlv in |hrcc (`i
vcars.
Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc
Givcn: 0.0525, m 4, | `
Iind r .
Solu|ion: n (4i(`i 12
n
1 2
j
1 1
m
r =
t
0 . 0 5 2 5
1 1
4
r =
3
r = 0 . 0 5 6 5 5 . 6 5 %
| |
+
|
\ .
| |
+
|
\ .

5
To Chcck To Chcck To Chcck To Chcck
Simplc In|crcs| Compu|a|ion Compound In|crcs| Compu|a|ion
Assumc: P P 1,000.00
1,169.38 P
4
0.0525
1 1,000.00 P
; ) 1 (
12

|
.
|

\
|
+ =
= + =
F
F
m
j
i i P F
n
[ ]
1,169.50 P
) 3 )( 565 . 0 ( 1 1,000.00 P
) 1 (

+ =
+ =
F
F
rt P F
Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork Samplc Lxcrcisc/Board Vork
Iind |hc simplc
discoun| ra|c |ha| is
cquivalcn| |o a
nominal ra|c ol
8.60 compoundcd
scmi-annuallv in a 8-
vcar |ransac|ion.
Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc Answcr |o Samplc Lxcrcisc
Givcn: - 0.0860, m 2, | 8
Iind: d .
Solu|ion: n (8i(2i 16
n
16
j 1
1
m 1 dt
0.0860 1
1
2 1 (d)(8)
Simplifying, 1.961322158 = 15.69057726d = 1
0.961322158 = 15.69057726d
0.061267481 d
d = 0.0613 6.13%
| |
+ =
|
\ .
| |
+ =
|
\ .
=

To Chcck To Chcck To Chcck To Chcck

Isin Nominal Ra|c Iormula Simplc Discoun| Compu|a|ion
Assumc: P P 1,000.00
1,961.32 P
2
0.0860
1 1,000.00 P
1
8 2

|
.
|

\
|
+ =
|
.
|

\
|
+ =
F
F
m
j
P F
x
n
1,961.32 P
) 8 )( 0613 . 0 ( 1
1,000.00 P

1

=
F
F
dt
P
F
Valucs ol Oblia|ion and |hcir Comparison Valucs ol Oblia|ion and |hcir Comparison Valucs ol Oblia|ion and |hcir Comparison Valucs ol Oblia|ion and |hcir Comparison
Iindin |hc valuc ol oblia|ion duc a| dillcrcn| da|cs rcquircs
ci|hcr accumula|in or discoun|in |hc compound
in|crcs|.
No|c:
1. In ordcr |o lind |hc valucs ol dillcrcn| oblia|ions
ma|urin a| dillcrcn| da|cs, compu|c |hcm |oc|hcr |o a
common comparison da|c (CDi.
2. Thcn accumula|c or discoun| cach oblia|ion usin
compoundin mc|hod |o |hc choscn CD.
`. Ol|cn |hc solu|ion rcquircs drawin/undcrs|andin |hc
|imclincs involvcd lor cach |ransac|ion.
Samplc Problcm Samplc Problcm Samplc Problcm Samplc Problcm
Il moncv is wor|h }7.0, m 2}, which is morc
valuablc:
a. P `,000.00 duc a| |hc cnd ol |hrcc (`i vcars
wi|h accumula|cd in|crcs| |odav a| }8.0,
m 2}, or
b. P `,800.00 duc wi|hou| in|crcs| a| |hc cnd ol
lour (4i vcars
Prcliminarv qucs|ion: Vha| is |hc comparison da|c
(CDi.
6
Valucs ol Oblia|ion Valucs ol Oblia|ion Valucs ol Oblia|ion Valucs ol Oblia|ion
S|cps in solvin:
1. Providc |hc ivcns
2. Draw |hc |imclinc (in | vcars or in n convcrsionsi
`. Plo| |hc oblia|ion wi|hou| in|crcs|
4. Compu|c I lor oblia|ion wi|h in|crcs|
5. Compu|c oblia|ion wi|h rcspcc| |o CD
Isin |hc Samc Samplc Problcm Isin |hc Samc Samplc Problcm Isin |hc Samc Samplc Problcm Isin |hc Samc Samplc Problcm
Il moncv is wor|h }7.0, m 2}, which is morc
valuablc:
a. P `,000.00 duc a| |hc cnd ol |hrcc (`i vcars
wi|h accumula|cd in|crcs| |odav a| }8.0,
m 2}, or
b. P `,800.00 duc wi|hou| in|crcs| a| |hc cnd ol
lour (4i vcars
Compu|c lor |hc valucs ol |hc oblia|ion
Answcr |o Samplc Problcm Answcr |o Samplc Problcm Answcr |o Samplc Problcm Answcr |o Samplc Problcm
S|cp 1. Givcn: 0.08, m 2, | `
i 0.04, n 6
CD cnd ol lour (4i vcars
S|cp 2. Draw |hc |imclinc
S|cps ` and 4. Compu|c P lor oblia|ion as a discoun|cd amoun|
and wi|h rcspcc| |o CD
0 1 2 ` 4
now
CD
800 , 3 P b.
4,066.33 P
2
07 . 0
1 3,795.96 P i) P(1
3,795.96 P
2
08 . 0
1 3,000.00 P i) P(1 a.
2 1
n
years 4 after
2 3
n
years 3 after
=
= |
.
|

\
|
+ = + =
= |
.
|

\
|
+ = + =
F
F
F
X
X
Al|crna|ivc Solu|ion: Discoun| P `,800.00 Al|crna|ivc Solu|ion: Discoun| P `,800.00 Al|crna|ivc Solu|ion: Discoun| P `,800.00 Al|crna|ivc Solu|ion: Discoun| P `,800.00
S|cp 1. Givcn: 0.08, m 2, | `
i 0.04, n 6
CD cnd ol lour (4i vcars
S|cp 2. Draw |hc |imclinc
S|cps ` and 4. Compu|c P lor oblia|ion as a discoun|cd amoun|
and wi|h rcspcc| |o CD
0 1 2 ` 4
now
CD
3,547.34 P
2
07 . 0
1 800 , 3 P b.
3,795.96 P
2
08 . 0
1 3,000.00 P i) P(1 a.
2
2 3
n
= |
.
|

\
|
+ =
= |
.
|

\
|
+ = + =
F
F
X
Lqua|ions ol Valuc Lqua|ions ol Valuc Lqua|ions ol Valuc Lqua|ions ol Valuc
An alcbraic cqua|ion s|a|in |ha| |hc sum ol onc sc|
ol valucs, on a ccr|ain common comparison da|c
(CDi is cqual |o |hc sum ol ano|hcr sc| ol valucs in
|hc samc common CD
Iormula: sum ol oblia|ions sum ol pavmcn|s
Con|inuous Compoundin Con|inuous Compoundin Con|inuous Compoundin Con|inuous Compoundin
Vhcn in|crcs| is compoundcd lrcqucn|lv as
cvcrvdav, cvcrv hour, cvcrv minu|c, or cvcrv
sccond.
Con|inuous compoundin slih|lv incrcascs |hc
compound amoun|.
Invcs|in a| an in|crcs| ra|c |ha| is compoundcd
con|inuouslv is no| a vcrv |cmp|in ollcr no| unlcss
o|hcr lac|ors arc |akcn in|o considcra|ion
7
Con|inuous Compoundin Iormula Con|inuous Compoundin Iormula Con|inuous Compoundin Iormula Con|inuous Compoundin Iormula
Thc lormula lor con|inuous compoundin is
I Pc
|
Vhcrc:
I compound amoun|
P principal
nominal ra|c |ha| is compound con|inuouslv
| |crm
c a cons|an| whosc valuc is approxima|clv cqual |o 2.71828
Iormula (2.24
Samplc Problcm wi|h Solu|ion Samplc Problcm wi|h Solu|ion Samplc Problcm wi|h Solu|ion Samplc Problcm wi|h Solu|ion
Iind |hc amoun| ol a P 10,000.00 invcs|mcn| a| |hc cnd ol
lour (4i vcars il i| is invcs|cd a| a ra|c ol 5.5
compoundcd con|inuouslv.
Givcn: P P 10,000.00; | 4
5.5 or 0.055
Rcquircd I
Solu|ion:
I Pc
|
I P 10,000.00c
(0.055i(4i
I P 12,460.77
Con|inuous Compoundin Iindin Con|inuous Compoundin Iindin Con|inuous Compoundin Iindin Con|inuous Compoundin Iindin P PP P
Thc prcscn| valuc ol I duc in | vcars a| a nominal
ra|c , compoundcd con|inuouslv is
Iormula (2.25
jt
jt
e F P
e
F
P

= = ) ( or
Ncx| Mcc|in Ncx| Mcc|in Ncx| Mcc|in Ncx| Mcc|in
Lxcrciscs: Conccn|ra|c
on Ac|ivi|v 2.7
(Valucs ol
Oblia|ioni |o
Ac|ivi|v 2.10
(Con|inuous
Compoundini
Samplc Problcms/Board Vork Samplc Problcms/Board Vork Samplc Problcms/Board Vork Samplc Problcms/Board Vork
1. Mr. X owcs P `,000.00 duc in |wo (2i vcars and P 5,000.00 duc in lour (4i vcars. Il
moncv is wor|h }14.0, m 2}, wha| simplc pavmcn| |hrcc (`i vcars hcncc will sc||lc
|hc oblia|ion.
2. Il moncv is wor|h 6.0 compoundcd annuallv, wha| |wo cqual pavmcn|s a| |hc cnd ol
|hrcc (`i vcars and scvcn (7i vcars rcspcc|ivclv, will discharc all liabili|ics on |hc
lollowin da|cs:
2.1 P 12,500.00 duc wi|hou| in|crcs| a| |hcn cnd ol lour (4i vcars
2.2 P 15,000.00 duc wi|h accumula|cd in|crcs| a| 8.0 compoundcd quar|crlv a| |hc
cnd ol six (6i vcars
2.` P 20,000.00 duc wi|h accumula|cd simplc in|crcs| ra|c ol 9.0 a| |hc cnd ol
ninc (9i vcars
Isc cnd ol livc (5i vcars as CD
`. P 100,000.00 duc in |hrcc (`i vcars accumula|cd in|crcs| |odav a| 6.0 compoundcd
mon|hlv. Thcrc was an arccmcn| |o pav in ins|allmcn|:
`.1 P 15,000.00 al|cr six (6i mon|hs
`.2 P 20,000.00 al|cr onc (1i vcar
`.` P `0,000.00 al|cr |wo (2i vcars
and |hc balancc a| |hc cnd ol |hrcc (`i vcars. Il moncv is wor|h 7.5 compoundcd
quar|crlv, wha| is |hc linal pavmcn| a| |hc cnd ol |hrcc (`i vcars.