This document defines key terms related to compound interest such as compound interest, compound amount, compounding period, total number of conversion periods, and periodic rate. It provides the formulas for calculating compound interest, compound amount, periodic rate, and total number of conversion periods. Examples are given to show how to apply these concepts and formulas to calculate compound interest and compound amount for given principal amounts over various time periods and interest rates compounded at different frequencies.

2.  Compound Interest (I)
an interest resulting from the periodic
addition of simple interest to the principal
amount.
Formulas: I = F – P and
I = P [ (1 + i) n – 1]

3.  Compound Amount (F)
an accumulated amount composed of the
principal and the compound interest.
Formula: F = P (1 + i) n

4.  Compounding or Conversion
period (m)
number of times in a year the
interest will be compounded.

5.  annually ; m = 1
 semi-annually; m = 2
 quarterly; m = 4
 monthly; m = 12
 weekly; m = 52
 daily; m = 360

6.  Total Number of Conversion
Period (n)
product of time (number of
years) and the conversion period.
Formula: n = tm

7.  Periodic Rate (i)
quotient of rate and
conversion period.
Formula: i = r/m

8. Note:
If the conversion period is not indicated in
the problem, then it is assumed to be
compounded annually, so m = 1.

9. Example 1:
Find the compound amount and
compound interest of P 4,000 for 4 years and 6
months compounded at 4% semi-annually.

10. Example 2:
Robbie wanted to put his money of P
38,000 in a bank so that it will grow but he put
it in a bank that will compound his money
semi-annually at 7% by 3 years and 2 months.
What is the compound interest?

11. Example 3:
Accumulate P 16,000 in 16 months at 16%
semi-annually.