# future amount

## How long will P2.5M amounts to P4.5M at 8% compounded quarterly?

**Problem**

By the conditions of a will, the sum of P2.5M is left to a girl to be held in a trust fund by her guardian until it amounts to P4.5M. When will the girl receive the money if the fund is invested at 8% compounded quarterly?

A. 7 years | C. 7.42 years |

B. 6.8 years | D. 7.25 years |

## Compound Interest

In compound interest, the interest earned by the principal at the end of each interest period (compounding period) is added to the principal. The sum (principal + interest) will earn another interest in the next compounding period.

Consider \$1000 invested in an account of 10% per year for 3 years. The figures below shows the contrast between simple interest and compound interest.

- Read more about Compound Interest
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