Simple

interest
When people need to secure funds for some purposes,
one of the ways they usually resort to is borrowing. On
the other hand, the person or institution, which lends
the money would also wish to get something in return
for the use of money.
DEBTOR OR MAKER the person who borrows money for any purpose

LENDER the person or institution which loans the money

INTEREST the payment for the use of borrowed money

PRINCIPAL the capital or sum of money invested

RATE OF INTEREST the fractional part of the principal that is paid on the loan

TIME OR TERM the number of units of the time for which the money is
borrowed and for which interest is calculated

FINAL AMOUNT OR the sum of the principal and interest which is accumulated
at a certain time
MATURITY VALUE

PRESENT VALUE the amount received by the borrower

interest in which only the original principal bears interest for the entire term of
the loan

interest added to the principal at the end of a certain period of time after which
the interest is computed on the new principal, and this process is repeated
until the end of the term of the loan is reached
John F borrows P10,000 at the rate of 12% per year. If
the loan is a simple interest loan, then the interest on
P10,000 is P1,200. At the end of one year, John F should
pay the lender a total amount of P11, 200.
Formula: where:
𝐼 - simple interest
𝑃 - principal amount
𝑰=𝑷∙𝒓∙𝒕 𝑟 - rate or percent of interest
𝑡 - units of time (usually in years)

𝑭=𝑷+𝑰 where:
𝐼 - simple interest
𝑃 - principal amount
𝑰=𝑭−𝑷 𝐹 - final amount
The term or time may be stated in any of the following ways:

When the time is expressed in number of year(s), our formula will be:

𝐼= 𝑃 × 𝑟 × 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒚𝒆𝒂𝒓𝒔

When the time is expressed in number of month(s):

𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒎𝒐𝒏𝒕𝒉𝒔
𝐼= 𝑃 × 𝑟 ×
12
Express the following in decimal form:

1.) 1.25%
2.) 96%
3.) 5 1⁄2%
4.) 25 3⁄4%
5.) 0.17%

Express the following in years:

1.) 36 months
2.) 6 months
3.) 75 months
4.) 15 months
Example 1
Find the interest and amount on Find the missing value:
P800 at 6 ½ % simple interest for 5 1.) 𝑃= P 2,300
years. 𝑟= 4%
𝑡= 3 ¼ years

Example 2 2.) 𝑃= P 5,500

Find the interest and amount on 𝐼= 610
P900 at 7 ¼% simple interest for 9 𝑟= 7 7⁄8%
months.
Example 1
If a principal of P 2,500 earns interest of P185 in 3 years
and 3 months, what interest rate is in effect?
Example 2
A principal earns interest of P 385 in 2 years and 9
months at a simple interest rate of 9.5 %. Find the
principal invested.
Example 3
How long will it take for P8,000 to earn P2, 400, if it is
invested at 6½% simple interest?