Question

Macky Pangan invested ₱2,500 at the end of every 3-month period for 5 years, at 8% interest compounded quarterly. How much is Macky’s investment worth after 5 years?

Answer 1

Compound interest with addition formula:

`A=P(1+(r)/(n))^(nt)+(PMT(1+(r)/(n))^(nt)-1)/((r)/(n))`

where,

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

PMT = Regular contributions (additional money added to investment)

in this example

P = 2500

r = 8% = 0.08

n = 4

t = 5 years

PMT = 2500

`A=2500(1+(0.08)/(4))^(4\cdot5)+(2500\cdot(1+(0.08)/(4))^(4\cdot5)-1)/((0.08)/(4))`

solving for A:

`A=189408.29`

Therefore, his investment after 5 years will be

$189,408.29