SIMPLE INTEREST 3.

Find the interest if 750,000 pesos is deposited in a

Definition of terms bank at an annual simple interest rate of 0.3% after
Lender or creditor – person or institution who invests 5 years?
the money or makes the funds available 4. When invested at annual interest rate of 7%, an
Borrower or debtor – person or institution who owes amount earned P11,200 of simple interest in two
the money or avails of the funds from the lender years. How much money was originally invested?
Origin or loan date – date on which money is received
by the borrower Maturity (Future) value
Repayment date or maturity date – date on which the F = P + Is
money borrowed or loan is to be completely repaid Where: F = maturity (future) value
Time or term (t) – amount of time in years the money is P = principal
borrowed or invested; length of time between the Is = simple interest
origin and maturity date. F = P(1 + rt)
Principal (P) – amount of money borrowed or invested Where: F = maturity (future) value
on the origin date P = principal
Rate (r) – annual rate, usually in percent, charged by the r = rate
lender, or rate of increase of the investment. t = time
Interest (I) – amount paid or earned for the use of Present value
𝐅
money P=
Simple Interest (Is) = interest that is computed on the 𝟏+𝐫𝐭
principal and then added to it
Example
Compound interest (Ic) = interest is computed on the
1. Jun deposited P17,000 in a bank at 14% interest per
principal and also on the accumulated past interest.
annum. How much will he expect to withdraw at
Maturity value or future value (F) = amount of t years;
the end of 2.5 years?
that the lender receives from the borrower on the
2. The total amount paid on a loan is P75,000. If the
maturity date.
loan was 3 years at 10% simple interest, what was
Annual Simple Interest:
the original loan?
Is = Prt
Where Is = simple interest P = principal
Activity #2
r = rate t = time, in years
Complete the table by finding the unknown.
Example
Principal Rate (r) Time (t) Interest Maturity
1. A bank offers 0.25% annual simple interest rate for
(P) (Is) value (F)
a particular deposit. How much interest will be
30,000 3.75% 8 a. b.
earned if 1 million pesos is deposited in this savings
c. 8% 3 27,000 d.
account for 1 year?
2. How much interest is charged when P50,000 is 100,000 e. 4 f. 120,875
borrowed for 9 months at an annual simple interest g. 11.2% h. 168,000 253,000
rate of 10%?
Complete the table below by finding the unknown i. How much is due at the end of 2.5 years if P20,000 is
Principal Rate Time Interest deposited in a bank that pays 10% simple interest?
a. 2.5% 4 1,500 j. How much must be invested today if Henry wants to
have P150,000 in 7 years if the interest rate is 18%?
36,000 b. 1.5 4,860
250,000 0.5% c. 275
Activity #3
500,000 12.5% 10 d.
1. Venus borrowed P35,000 from a bank at 12.5%
Activity #1
simple interest for 5 years. How much will she pay
Find the unknown principal P, rate r, time t, and interest
the bank after 5 years?
Is by completing the table.
2. If Rose borrowed P42,000 from a bank at 10.5%
Principal (P) Rate (r) Time (t) Interest (I)
simple interest, how much will she pay at the end of
10,000 8% 15 1.)
1.25 years?
2.) 2% 5 10,000
3. The total amount paid on a loan is P84,000. If the
360,000 3.) 2 3,600 loan was for 2 years at 9% simple interest, what was
500,000 10.5% 4.) 175,500 the original loan?
COMPOUND INTEREST 5. Find the compound amount if P48,000 is deposited
in a bank paying 8% compounded quarterly for 6
Compound Amount Formula years.
F = P(1 + i)n 6. Cris borrowed P50,500 from Romy. He promised to
where: pay the interest and the principal after 4 years. How
F = final amount much would Romy receive from Cris if he charged
P = Principal interest at 9% compounded monthly?
i = j/m j = nominal rate; m = conversion 7. Find the present value of P80,000 due at the end of
n = tm t = time; m = conversion years if interest is computed at 14% compounded
semi-annually.
Frequencies of conversion (m) 8. What is the compound amount if P79,000 is
Annually m=1 invested for 3 years at 12% compounded semi-
Semi-annually m=2 annually?
Quarterly m=4 9. Honey received P7,000 after 12 months at 10%
Monthly m = 12 converted quarterly. What was her initial payment?
10. Mary would like to have 250,000 five years from
Examples: now. What sum of money should she deposit today
1. Find the amount if P5,000 is invested at 8% in a bank paying 12% compounded monthly?
compounded quarterly for 4 years.
2. Find the amount if P12,000 is invested at 9%
compounded semi-annually for 2 years.
SOURCE: GENERAL MATHEMATICS TG 2016
Compound Present Value Formula
P = F(1 + i)-n
where:
F = final amount
P = Principal
i = j/m j = nominal rate; m = conversion
n = tm t = time; m = conversion

Examples:
1. Ferdinand wants to have P85,000 in his account by
the end of 3 years. How much should he invest
today in a bank that pays 9% compounded
monthly?
2. Find the present value of P80,000 at the end of 8
years if interest is computed at 14% compounded
semi-annually.

Activity
Principal Time Rate Amount
25,000 4 years 12%; 1.)
Quarterly
2.) 1 year 18%; semi- 90,000
annually
3.) 10 years 15%; 145,000
monthly
45,000 3 years 8%; 4.)
annually