1. Find Principal P = ?
Interest Rate i = 10%, Time n = 5 Year, Future value FV = 1649,
for Contineous Compounding method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`FV=1649` (Future value)
`FV=P*e^(i*n)`
`:.1649=P*e^(0.1*5)`
`:.1649=P*e^(0.5)`
`:.1649=P*1.65`
`:.P=1649/1.65`
`:.P=1000.17`
| Year | Principal | Yearly Interest | Total Interest | Total Balance |
| 0 | 1000.17 | 0 | 0 | 1000.17 |
| 1 | 1000.17 | 105.19 | 105.19 | 1105.36 |
| 2 | 1000.17 | 116.25 | 221.44 | 1221.61 |
| 3 | 1000.17 | 128.48 | 349.92 | 1350.09 |
| 4 | 1000.17 | 141.99 | 491.91 | 1492.08 |
| 5 | 1000.17 | 156.92 | 648.83 | 1649 |
2. Find Principal P = ?
Interest Rate i = 10%, Time n = 3 Year, Future value FV = 6749,
for Contineous Compounding method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`FV=6749` (Future value)
`FV=P*e^(i*n)`
`:.6749=P*e^(0.1*3)`
`:.6749=P*e^(0.3)`
`:.6749=P*1.35`
`:.P=6749/1.35`
`:.P=4999.78`
| Year | Principal | Yearly Interest | Total Interest | Total Balance |
| 0 | 4999.78 | 0 | 0 | 4999.78 |
| 1 | 4999.78 | 525.83 | 525.83 | 5525.61 |
| 2 | 4999.78 | 581.13 | 1106.97 | 6106.75 |
| 3 | 4999.78 | 642.25 | 1749.22 | 6749 |
This material is intended as a summary. Use your textbook for detail explanation.
Any bug, improvement, feedback then
