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The Simple Interest

The document discusses simple interest, which is calculated based on the principal amount, interest rate, and time period. The formula for simple interest is I=Prt, where I is interest, P is principal, r is interest rate, and t is time. Several examples are provided to illustrate how to use the formula to calculate simple interest earned on investments, interest paid on loans, and interest rates based on the interest and principal amounts.

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786 views3 pages

The Simple Interest

The document discusses simple interest, which is calculated based on the principal amount, interest rate, and time period. The formula for simple interest is I=Prt, where I is interest, P is principal, r is interest rate, and t is time. Several examples are provided to illustrate how to use the formula to calculate simple interest earned on investments, interest paid on loans, and interest rates based on the interest and principal amounts.

Uploaded by

kira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • The Simple Interest
  • Illustrative Examples

THE SIMPLE INTEREST

 Simple interest on the amount invested or borrowed is computed based on the


principal, interest rate, and length of time for which the money is invested or
borrowed.
 The formula for the simple interest is
I=P x r x t
ILLUSTRATIVE EXAMPLES:

1. How much interest will Mary earn in her investment of P12,400.00 at 6%


simple interest for 3 years?

I=Prt
= 12,400 x .06 x 3
= 2,232

2. Sophia borrowed P25,000 from a lending corporation that charges 12% with
an agreement to pay the principal and interest at the end of the term. If she
paid P35,500 at the end of the term, for how lond did she use the money?

t= I__
Pr
= 10,500
25,000(.12)
= 10,500
3,000
= 3.5 yrs

3. Julienne needs 60,000 to buy cooking equipment for her new house. She is
willing to pay the interest of 8,400 if she borrowed the amount from the bank.
If she intends to pay her obligation within 2 years, what must be the interest
rate of her loan?

r= I___
Pt
= 8,400
60000 (2)
= .07 / 7%

4. To finance her new business, Faith borrowed P125,000 from her brother with
the agreement to pay the amount together with the interest at the end of 4
years at 3% interest rate. How much did Faith pay her brother?

I=Prt
= 125,000 x .03 x 4
= 15,000

F= P + I
= 125, 000 + 15, 000
= 140,000
 Banker’s rule: calculating interest on a loan based on ordinary interest and
exact time which yields a slightly higher amount of interest.
 Ordinary interest: a rate per day that assumes 360 days per year.
 Exact interest: a rate per day that assumes 365 days per year.

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