Business

Mathematics
CHAPTER 4
OBJECTIVES
• Solve problems involving simple
interest, compound interest, discount
and ordinary annuity
• Develop the concept of critical thinking
and problem-solving skills
• Learn how to manage finances
SIMPLE INTEREST
• Simple interest is interest calculated on the
principal portion of a loan or the original
contribution to a savings account. Simple
interest does not compound, meaning that
an account holder will only gain interest on
the principal, and a borrower will never
have to pay interest on interest already
accrued.
SIMPLE INTEREST
𝑭=𝑷+𝑰
𝑰 = 𝑷𝒓𝒕
𝑭 = 𝑷 𝟏 + 𝒓𝒕
Where F is the full/total amount, P is the
principal/original amount, I is the interest
amount, r is the rate, and t is time
(represented in years)
SIMPLE INTEREST
• How much interest would you
get if you invest P10,000 for
6.85% interest in 4 years?
How much interest would you get if you invest P10,000 for 6.85% interest in 4
years?

𝑰 = 𝑷𝒓𝒕
𝑷 = 𝑷𝟏𝟎, 𝟎𝟎𝟎
𝒓 = 𝟔. 𝟖𝟓% = 𝟎. 𝟎𝟔𝟖𝟓
𝒕 = 𝟒 𝒚𝒆𝒂𝒓𝒔
𝑰 = 𝑷𝒓𝒕 = 𝟏𝟎, 𝟎𝟎𝟎 𝟎. 𝟎𝟔𝟖𝟓 𝟒
𝑰 = 𝑷𝟐𝟕𝟒𝟎
SIMPLE INTEREST
• At what interest rate would
you invest P5,000 to get
P12,000 after 5 ½ years?
At what interest rate would you invest P5,000 to get P12,000 after 5 ½ years?

𝒓 =?
𝑷 = 𝑷𝟓, 𝟎𝟎𝟎
𝑭 = 𝑷𝟏𝟐, 𝟎𝟎𝟎
𝑰
𝒓=
𝑷𝒕
𝑭=𝑷+𝑰
𝑰=𝑭−𝑷
𝑰 = 𝑭 − 𝑷 = 𝑷𝟕, 𝟎𝟎𝟎
𝒕 = 𝟓. 𝟓 𝒚𝒆𝒂𝒓𝒔
𝟕, 𝟎𝟎𝟎
𝒓= = 𝟎. 𝟐𝟓𝟒𝟓 = 𝟐𝟓. 𝟒𝟓%
𝟓, 𝟎𝟎𝟎 𝟓. 𝟓
SIMPLE INTEREST
• What is the original price of
an amount of P33,000 at 8%
interest for 5 ¾ years?
What is the original price of an amount of P33,000 at 8% interest for 5 ¾ years?

𝑷=?
𝑭 = 𝑷𝟑𝟑, 𝟎𝟎𝟎
𝒓 = 𝟎. 𝟎𝟖
𝒕 = 𝟓. 𝟕𝟓
𝑭 = 𝑷 𝟏 + 𝒓𝒕
𝑭 𝑷 𝟏 + 𝒓𝒕
=
𝟏 + 𝒓𝒕 𝟏 + 𝒓𝒕
𝑭
=𝑷
𝟏 + 𝒓𝒕

𝑭 𝟑𝟑, 𝟎𝟎𝟎
𝑷= = = 𝑷𝟐𝟐, 𝟔𝟎𝟐. 𝟕𝟒
𝟏 + 𝒓𝒕 𝟏 + (𝟎. 𝟎𝟖)(𝟓. 𝟕𝟓)
SIMPLE INTEREST
TIME: NUMBER OF DAYS
Approximate: Assume all
months have 30 days
Actual: Assume actual number
of days in a month
SIMPLE INTEREST
Actual: Assume actual June – 30
number of days in a July – 31
month
January - 31 August – 31
February – 28 or 29 September – 30
March – 31 October – 31
April – 30 November – 30
May – 31 December – 31
SIMPLE INTEREST
TIME: NUMBER OF DAYS
Ordinary: divides the number
of days by 360
Exact: divides the number of
days by 365 or 366
SIMPLE INTEREST
• How many ordinary interest
days would you need in order
to have P25,000 from
P12,000 at 7.25% interest?
How many ordinary interest days would you need in order to have P25,000 from
P12,000 at 7.25% interest?

𝒕 =?
𝑷 = 𝑷𝟏𝟐, 𝟎𝟎𝟎
𝑭 = 𝑷𝟐𝟓, 𝟎𝟎𝟎
𝒓 = 𝟕. 𝟐𝟓% = 𝟎. 𝟎𝟕𝟐𝟓
𝑰
𝒕=
𝑷𝒓
𝑰 = 𝑭 − 𝑷 = 𝑷𝟏𝟑, 𝟎𝟎𝟎
𝑰 𝟏𝟑, 𝟎𝟎𝟎
𝒕= = = 𝟏𝟒. 𝟗𝟒 𝒚𝒆𝒂𝒓𝒔 × 𝟑𝟔𝟎 𝒅𝒂𝒚𝒔
𝑷𝒓 (𝟏𝟐, 𝟎𝟎𝟎)(𝟎. 𝟎𝟕𝟐𝟓)
𝒕 = 𝟓, 𝟑𝟕𝟗. 𝟑𝟏 𝒅𝒂𝒚𝒔
SIMPLE INTEREST
• How much total amount of
actual-ordinary will you get
from P35,000 at 5.5%
interest starting from April
27, 2019 to December 3,
2019?
How much total amount of actual-ordinary will you get from P35,000 at 5.5%
interest starting from April 27, 2019 to December 3, 2019?

Apr 30-27= 3 𝑭 =?
May 31
𝑷 = 𝑷𝟑𝟓, 𝟎𝟎𝟎
Jun 30
𝒓 = 𝟓. 𝟓% = 𝟎. 𝟎𝟓𝟓
Jul 31
Aug 31
𝒕 =? 𝑨𝒑𝒓𝒊𝒍 𝟐𝟕, 𝟐𝟎𝟏𝟗 𝒕𝒐 𝑫𝒆𝒄. 𝟑, 𝟐𝟎𝟏𝟗
Sep 30
𝒕 = 𝟐𝟐𝟎 𝒅𝒂𝒚𝒔
Oct 31
Nov 30 𝑭 = 𝑷 𝟏 + 𝒓𝒕
Dec 3
𝟐𝟐𝟎
𝑭 = 𝟑𝟓, 𝟎𝟎𝟎 𝟏 + 𝟎. 𝟎𝟓𝟓
𝟑𝟔𝟎
𝑭 = 𝑷𝟑𝟔, 𝟏𝟕𝟔. 𝟑𝟗
SIMPLE INTEREST
• How much interest would you
get from a total/final amount
of P43,000 with 7.5% interest
at 219 days of ordinary
interest?
How much interest would you get from a total/final amount of P43,000 with 7.5%
interest at 219 days of ordinary interest?

𝑰 =?
𝑭 = 𝑷𝟒𝟑, 𝟎𝟎𝟎
𝒓 = 𝟕. 𝟓% = 𝟎. 𝟎𝟕𝟓
𝟐𝟏𝟗
𝒕=
𝟑𝟔𝟎
𝑷 =?
𝑭 = 𝑷 𝟏 + 𝒓𝒕
𝑭 𝑷 𝟏 + 𝒓𝒕 𝑭 𝟒𝟑𝟎𝟎𝟎
= ⇒𝑷= = = 𝑷𝟒𝟏, 𝟏𝟐𝟑. 𝟕𝟑
𝟏 + 𝒓𝒕 𝟏 + 𝒓𝒕 𝟏 + 𝒓𝒕 𝟏 + 𝟎. 𝟎𝟕𝟓 𝟐𝟏𝟗
𝟑𝟔𝟎
𝑭 = 𝑷 + 𝑰 ⇒ 𝑰 = 𝑭 − 𝑷 = 𝑷𝟒𝟑, 𝟎𝟎𝟎 − 𝑷𝟒𝟏, 𝟏𝟐𝟑. 𝟕𝟑
𝑰 = 𝑷𝟏, 𝟖𝟕𝟔. 𝟐𝟕
SIMPLE INTEREST
• How much is the full amount
if I invest P15,000 at 5%
interest for 4 ½ years?
How much is the full amount if I invest P15,000 at 5% interest for 4 ½ years?

𝑭 =?
𝑷 = 𝑷𝟏𝟓, 𝟎𝟎𝟎
𝒓 = 𝟓% = 𝟎. 𝟎𝟓
𝒕 = 𝟒. 𝟓
𝑭 = 𝑷 𝟏 + 𝒓𝒕
= 𝟏𝟓, 𝟎𝟎𝟎 𝟏 + 𝟎. 𝟎𝟓 𝟒. 𝟓 = 𝑷𝟏𝟖, 𝟑𝟕𝟓
SIMPLE DISCOUNT
• Simple discount notes are also called
interest-in-advance notes, since interest
is subtracted before funds are given to
the borrower. The main difference is
that simple interest is calculated based
on principal, whereas simple discount is
calculated based on maturity value.
SIMPLE DISCOUNT
𝑰𝒅 = 𝑷𝒅𝒕
𝑭 = 𝑷 𝟏 − 𝒅𝒕
𝑭 = 𝑷 − 𝑰𝒅
Where F is the full/total amount, P is the
principal/original amount, 𝑰𝒅 is the
interest amount at discount, d is the
discount rate, and t is time (represented
in years)
SIMPLE DISCOUNT
• What will be the original
amount of P20,000 if it was
discounted at a rate of 6.5%
for 5 years?
What will be the original amount of P20,000 if it was discounted at a rate of 6.5%
for 5 years?

𝑷 =?
𝑭 = 𝑷𝟐𝟎, 𝟎𝟎𝟎
𝒅 = 𝟔. 𝟓% = 𝟎. 𝟎𝟔𝟓
𝒕=𝟓
𝑭
𝑭 = 𝑷 𝟏 − 𝒅𝒕 ⇒ 𝑷 =
𝟏 − 𝒅𝒕
𝟐𝟎, 𝟎𝟎𝟎
= = 𝑷𝟐𝟗𝟔𝟐𝟗. 𝟔𝟑
𝟏 − 𝟎. 𝟎𝟔𝟓 𝟓
SIMPLE DISCOUNT
• How much is the discount
rate if the amount goes from
P2500 to P1500 for 250 days
at ordinary interest?
How much is the discount rate if the amount goes from P2500 to P1500 for 250
days at ordinary interest?

𝒅 =?
𝑷 = 𝑷𝟐, 𝟓𝟎𝟎
𝑭 = 𝑷𝟏, 𝟓𝟎𝟎
𝟐𝟓𝟎
𝒕=
𝟑𝟔𝟎
𝑰𝒅
𝑰𝒅 = 𝑷𝒅𝒕 ⇒ 𝒅 =
𝑷𝒕
𝑭 = 𝑷 − 𝑰𝒅 ⇒ 𝑰𝒅 = 𝑷 − 𝑭 = 𝟐, 𝟓𝟎𝟎 − 𝟏, 𝟓𝟎𝟎 = 𝑷𝟏, 𝟎𝟎𝟎

𝑰𝒅 𝟏𝟎𝟎𝟎
𝒅= = = 𝟎. 𝟓𝟕𝟔 = 𝟓𝟕. 𝟔%
𝑷𝒕 𝟐𝟓𝟎
𝟐𝟓𝟎𝟎
𝟑𝟔𝟎
SIMPLE DISCOUNT
• What is the full/total amount
if the original price is P750 at
6.25% discount rate for 3.5
years?
What is the full/total amount if the original price is P750 at 6.25% discount rate
for 3.5 years?

𝑭 =?
𝑷 = 𝑷𝟕𝟓𝟎
𝒅 = 𝟔. 𝟐𝟓% = 𝟎. 𝟎𝟔𝟐𝟓
𝒕 = 𝟑. 𝟓
𝑭 = 𝑷 𝟏 − 𝒅𝒕
= 𝟕𝟓𝟎 𝟏 − 𝟎. 𝟎𝟔𝟐𝟓 𝟑. 𝟓 = 𝑷𝟓𝟖𝟓. 𝟗𝟒
COMPOUND INTEREST
Compound interest is the addition
of interest to the principal sum of a loan or
deposit, or in other
words, interest on interest. It is the result
of reinvesting interest, rather than paying
it out, so that interest in the next period is
then earned on the principal sum plus
previously accumulated interest.
COMPOUND INTEREST
𝒓 𝒏𝒕
𝑭=𝑷 𝟏+
𝒏
Where F is the full/total amount, P is
the principal/original amount, r is the
rate, n is the compounding period and
t is time (represented in years)
COMPOUND INTEREST
For n in the compounding period:
n = 1 if annually;
n = 2 if semi-annually;
n = 4 if quarterly; and
n = 12 if monthly
COMPOUND INTEREST
• How much is the total amount
of P20,000 at 8.75%
compounded quarterly for
3 ½ years?
How much is the total amount of P20,000 at 8.75% compounded quarterly for 3 ½
years?

𝑭 =?
𝑷 = 𝑷𝟐𝟎, 𝟎𝟎𝟎
𝒓 = 𝟖. 𝟕𝟓% = 𝟎. 𝟎𝟖𝟕𝟓
𝒏=𝟒
𝒕 = 𝟑. 𝟓
𝟒 𝟑.𝟓
𝒓 𝒏𝒕 𝟎. 𝟎𝟖𝟕𝟓
𝑭=𝑷 𝟏+ = 𝟐𝟎𝟎𝟎𝟎 𝟏 +
𝒏 𝟒
= 𝑷𝟐𝟕, 𝟎𝟕𝟔. 𝟖𝟗
COMPOUND INTEREST
• How much is the interest of
P35,000 at 5% compounded
monthly for 4 ¼ years?
How much is the interest of P35,000 at 5% compounded monthly for 4 ¼ years?

𝑰 =?
𝑷 = 𝑷𝟑𝟓, 𝟎𝟎𝟎
𝒓 = 𝟓% = 𝟎. 𝟎𝟓
𝒏 = 𝟏𝟐
𝒕 = 𝟒. 𝟐𝟓
𝑭 =?
𝒏𝒕 𝟏𝟐 𝟒.𝟐𝟓
𝒓 𝟎. 𝟎𝟓
𝑭=𝑷 𝟏+ = 𝟑𝟓𝟎𝟎𝟎 𝟏 + = 𝑷𝟒𝟑, 𝟐𝟔𝟕. 𝟕𝟏
𝒏 𝟏𝟐
𝑭=𝑷+𝑰⇒𝑰=𝑭−𝑷
𝑰 = 𝟒𝟑, 𝟐𝟔𝟕. 𝟕𝟏 − 𝟑𝟓, 𝟎𝟎𝟎 = 𝑷𝟖, 𝟐𝟔𝟕. 𝟕𝟏
COMPOUND INTEREST
• How much is the total amount
of P25,000 at 3.25%
compounded annually for
200 days at exact interest?
How much is the total amount of P25,000 at 3.25% compounded annually for 200
days at exact interest?

𝑭 =?
𝑷 = 𝑷𝟐𝟓, 𝟎𝟎𝟎
𝒓 = 𝟑. 𝟐𝟓% = 𝟎. 𝟎𝟑𝟐𝟓
𝒏=𝟏
𝟐𝟎𝟎
𝒕=
𝟑𝟔𝟓 𝟐𝟎𝟎
𝟏
𝒓 𝒏𝒕 𝟎. 𝟎𝟑𝟐𝟓 𝟑𝟔𝟓
𝑭=𝑷 𝟏+ = 𝟐𝟓𝟎𝟎𝟎 𝟏 +
𝒏 𝟏
= 𝑷𝟐𝟓, 𝟒𝟒𝟏. 𝟗𝟗
COMPOUND INTEREST
• What is the principal amount
of P25,000 at 9%
compounded semi-annually
for 5.75 years?
What is the principal amount of P25,000 at 9% compounded semi-annually for
5.75 years?

𝑷 =?
𝑭 = 𝑷𝟐𝟓, 𝟎𝟎𝟎
𝒓 = 𝟗% = 𝟎. 𝟎𝟗
𝒏=𝟐
𝒕 = 𝟓. 𝟕𝟓
𝒓 𝒏𝒕
𝑭=𝑷 𝟏+
𝒏
𝒓 𝒏𝒕
𝑭 𝑷 𝟏+ 𝑭
= 𝒏 ⇒𝑷=
𝒓 𝒏𝒕 𝒓 𝒏𝒕 𝒓 𝒏𝒕
𝟏+ 𝟏+ 𝟏+
𝒏 𝒏 𝒏

𝑭 𝟐𝟓𝟎𝟎𝟎
𝑷= 𝒏𝒕 = = 𝑷𝟏𝟓, 𝟎𝟔𝟗. 𝟔𝟑
𝒓 𝟎. 𝟎𝟗 𝟐 𝟓.𝟕𝟓
𝟏+ 𝟏+
𝒏 𝟐
COMPOUND INTEREST
• How many exact interest days
would be needed to get
P85,000 from P40,000 at
6.5% compounded quarterly?
How many exact interest days would be needed to get P85,000 from P40,000 at
6.5% compounded quarterly?

𝒕 =? (𝒆𝒙𝒂𝒄𝒕 𝒅𝒂𝒚𝒔)
𝑭 = 𝑷𝟖𝟓, 𝟎𝟎𝟎
𝑷 = 𝑷𝟒𝟎, 𝟎𝟎𝟎
𝒓 = 𝟔. 𝟓% = 𝟎. 𝟎𝟔𝟓
𝒏=𝟒
𝒓 𝒏𝒕
𝑭=𝑷 𝟏+
𝒏
𝒓 𝒏𝒕
𝑭 𝑷 𝟏+𝒏 𝑭 𝒓 𝒏𝒕
= ⇒ = 𝟏+
𝑷 𝑷 𝑷 𝒏
𝑭 𝒓 𝑭
𝑭 𝒓 𝒏𝒕 𝒍𝒐𝒈 𝒏𝒕 𝒍𝒐𝒈 𝟏 + 𝒍𝒐𝒈
𝑷 𝒏 𝑷
𝒍𝒐𝒈 = 𝒍𝒐𝒈 𝟏 + ⇒ 𝒓 = 𝒓 ⇒𝒕= 𝒓
𝑷 𝒏 𝒏 𝒍𝒐𝒈 𝟏 + 𝒏 𝒏 𝒍𝒐𝒈 𝟏 + 𝒏 𝒏 𝒍𝒐𝒈 𝟏 + 𝒏

𝑭 𝟖𝟓𝟎𝟎𝟎
𝒍𝒐𝒈 𝒍𝒐𝒈
𝑷 𝟒𝟎𝟎𝟎𝟎
𝒕= 𝒓 = = 𝟏𝟏. 𝟔𝟗 𝒚𝒆𝒂𝒓𝒔 × 𝟑𝟔𝟓 = 𝟒, 𝟐𝟔𝟕. 𝟎𝟐 𝒅𝒂𝒚𝒔
𝒏 𝒍𝒐𝒈 𝟏 + 𝒏 𝟎. 𝟎𝟔𝟓
𝟒 𝒍𝒐𝒈 𝟏 + 𝟒
 SIMPLE ANNUITIES
• An ANNUITY is a series of payments made at equal intervals. Examples of
annuities are regular deposits to a savings account, monthly home
mortgage payments, monthly insurance payments and pension
payments. Annuities can be classified by the frequency of payment dates.
The payments (deposits) may be made weekly, monthly, quarterly, yearly,
or at any other regular interval of time.
• •SIMPLE ANNUITY is where interest is compounded at the same times as
the annuity payments.
• •An ORDINARY ANNUITY is one where the payments are made at the end
of each period.
• •An ANNUITY DUE is one where the payments are made at the beginning
of each period.
SIMPLE ANNUITIES
SIMPLE ANNUITIES
SIMPLE ANNUITIES
SIMPLE ANNUITY
•How much is the original
amount of an investment at
P10,000 at the end of every 6
months with 7.25%
compounded semi-annually
for 3.5 years?
•How much is the original amount of an investment at P10,000 at the
end of every 6 months with 7.25% compounded semi-annually for
3.5 years?
SIMPLE ANNUITY
•How much is the original
amount of an investment at
P10,000 at the end of every 6
months with 7.25%
compounded semi-annually
for 3.5 years?
•How much is the original amount of an investment at P10,000 at the
end of every 6 months with 7.25% compounded semi-annually for
3.5 years?
SIMPLE ANNUITY
•How much is the original
amount of an investment at
P10,000 at the end of every 6
months with 7.25%
compounded semi-annually
for 3.5 years?
•How much is the original amount of an investment at P10,000 at the
end of every 6 months with 7.25% compounded semi-annually for
3.5 years?
SIMPLE ANNUITY
•How much is the original
amount of an investment at
P10,000 at the end of every 6
months with 7.25%
compounded semi-annually
for 3.5 years?
•How much is the original amount of an investment at P10,000 at the
end of every 6 months with 7.25% compounded semi-annually for
3.5 years?

𝑭𝒓
𝐥𝐨𝐠 𝑨𝒏 + 𝟏
𝒕= 𝒓
𝒏 𝐥𝐨𝐠(𝟏 + 𝒏)