General

Mathematics
LAS, Week 2 – Quarter 2
 I. Computes and Solves Problems
Involving Simple and Compound
Interest

Content Standards: The learner demonstrates understanding of

the key concepts of simple and compound
interest.

Performance Standards: The learner can accurately compute

simple and compound interest
environment.

Most Essential Learning Competency:

Computes interest, maturity value, future value and present
value of simple and compound interest

Solves problems involving simple and compound interests

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II. CONCEPT NOTES

Computing Interest, Maturity Value, Future Value, and

Present Value in Simple and Compound Interests
Environment

Simple Interest (Is) - interest that is computed on the principal

and then added to it.

Compounded Interest (Ic) – interest is computed on the principal

and on the accumulated past
interests.

Principal (P) – amount of money borrowed or invested on the origin

date.

Interest (I)- amount paid or earned for the use of the money.

Rate (r) – annual rate, usually in percent, charge by the lender or

rate of increase of the investment.

Maturity value or Future value (F)- amount after t years that the
lender receives from the borrower on the maturity date.
Time or Term (t) – amount of time in years the money is borrowed
or invested; length of time between the origin
and maturity dates.

Repayment date or maturity date – date on which the money

borrowed or loan is to be completely repaid.

Origin or Loan date - date on which money is received by the

borrower.

Borrower – person (institution) who owes the money or avails of

the funds from the lender.

Lender or creditor – person (or institution) who invests the money

or makes the funds available.

Present value (PV) - is the current value of a future sum of money

or stream of cash flows given a specified rate
of return.
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Future value - is the value of an asset at a specific date. It
measures the nominal future sum of money that a
given sum of money is "worth" at a specified time in
the future assuming a certain interest rate.

Annual Simple Interest

𝑰𝒔 = 𝑷𝒓𝒕
where 𝐼𝑠 = Simple Interest
P = principal or the amount invested or borrowed
r = simple interest rate
t = term or time in years

Example 1: You want to have an interest income of P10,000 a year.

Find how much must you invest for one year at 8%?
Find: P

Solution:

P = 125,000
Answer: The principal amount invested is P125,000

Example 2: Given: P = 1,000,000 I = 0.25% = 0.0025 t = 1 year

Find: Is

Solution: Is = Prt

Is = (1,000,000)(0.0025)(1)

Is = 2,500
Answer: The interest earned is P2,500.

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Example 3 : Given: P = 50,000 I = 10% = 0.10 t = 9/12 year

Find: Is Note: When the term

is expressed in
Solution: Is = Prt
months (M), it should
Is = (50,000)(0.10)(9/12)
be converted in
Is = (50,000)(0.10)(0.75)
Is = 3,750
years by

Answer: The simple interest charged is P 3,750.

Example 4: Given: r = 7% = 0.07 t = 2 years IS = 11,200

Find: Amount invested or principal P.

Solution: P =

P=
P = 80,000
Answer: The amount invested is P 80,000.

~Maturity or Future Value - Simple Interest

Maturity value or Future value (F)- amount after t years that the
lender receives from the borrower on the maturity date.

Maturity (Future) Value

F = P + Is
where F = maturity (future) value
P = principal
Is = simple interest

Substituting Is by Prt gives F = P + Prt = P(1 + rt)

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 Maturity (Future) Value
F = P(1 + rt)
where F = maturity(future) value
P = principal
r = interest rate t = term/ time in year

Example 1: Find the maturity value if 1 million pesos is deposited in a

bank at an annual simple interest rate of 0.25% after
(a) 1 year ; (b) 5 years?

Given: P = 1,000,000 r = 0.25% = 0.0025

Find: (a) maturity or future value F after 1 year
(b) maturity or future value F after 5 years

Solution: (a) When t = 1, the simple interest is given by

Method 1: Method 2:
Is = Prt To directly solve the future
Is = (1,000,000)(0.0025)(1) value F,
Is = 2, 500 F = P(1 + rt)
The maturity or future value is F = (1,000,000)(1 + 0.0025(1))
given by F = 1,002,500
F = P + Is Answer: The future or maturity
F = 1,000,000 + 2,500 value after 1 year is P1,002,500.
F = 1,002,500

(b) When t = 5,

Method 1: Method 2:
Is = Prt F = P(1 + rt)
Is = (1,000,000)(0.0025)(5) F = (1,000,000)(1 + 0.0025(5))
Is = 12,500 F = 1,012,500
F = P + Is Answer: The future or
F = 1,000,000 + 12,500 maturity value after 5 years is
F = 1,012,500 P1,012,500.

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Example 2: How long will 1 million pesos earn a simple interest of
100,000 at 1% per annum?
Given: P = 1,000,000 Is = 100,000 r = 0.01

Solution: t =

Answer: t = 10 years

Example 3: How much money will you have after 4 years and 3 months
if you deposited P10,000 in a bank that pays 0.5% simple interest?

Given: P = 10,000, r = 0.005, t = 4.25 years

Find: F

Solution:
F = P(1 + rt)
F = (10,000)(1 + 0.005(4.25))

Answer: F = 10,212.25

~Present Value-Simple Interest

The sum of money that can be deposited to yield some large amount in
the future is called the present value of that future amount.

FORMULA:

Example 1:
How much should you invest at the simple interest is 7.5% in
order to have P300,000 in 2 years?
Given: r = 0.075 F = 300,000 t=2
Find: P
Solution:
P=
P=

Answer: P = 260,869.57
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Example 2: Find the present value of 32, 000 pesos in 4 months at 9%
interest.
Solution:

P=
P=

Answer: P= 31,067.96

~Compound Interest

It is the interest on a loan or deposit calculated based on both the initial

principal and the accumulated interest from previous periods.

A= Amount (Future Value)

P=Principal (Initial Value)
r= Interest Rate
n= number of times compounded in one “t”
t= time

Example 1: Given: P = P25, 000; I=4.25%; n=12; t= 3 years

Solution: A= P

A = 25,

A= P28,393

The following table shows the amount at the end of each year if principal
P is invested at an annual interest rate r compounded annually.
Computations for the particular example P = P100,000 and r = 5% are
also included.

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Year Principal =P Principal = P100,000
(t) Interest rate = r Interest rate = 5%
Compounded annually Compounded annually
Amount at the end of the year Amount at the end of the year
1 P x (1+r) = P (1+r) 100,000 x 1.05 = 105,000
2 P (1+r) x(1+r)= P (1+r)2 105,000 x 1.05 = 110,250
3 P (1+r)2 x(1+r)= P (1+r)3 110,250 x 1.05 = 115,762.5
4 P (1+r)3 x(1+r)= P (1+r)4 115,762.5 x 1.05 = 121, 550.625

MATURITY VALUE (Future) Value and Compound

Interest
F= P(1+r)t
where
P = principal or present value
F = maturity (future) value at the end of the term
r = interest rate
t = term/ time in years
The compound interest Ic is given by
Ic = F - P

Example 1.
Find the maturity value and interest if P 50,000 is invested at 5%
compounded annually for 8 years.

Given: P = 50,000 r = 5% = 0.05 t = 8 years

Find:
(a) maturity value F (b) compound interest Ic

Solution:
(a) F= P(1+r)t
F = (50,000)(1 + 0.05)8
F = 73,872.77

(b) Ic = F – P
Ic = 73,872.77 – 50,000
Ic = 23,872.77
Answer: The maturity value F is P73,872.77 and the compound
interest is P23,872.77.

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Example 2.
Suppose your father deposited in your bank account P10,000 at an
annual interest rate of 0.5% compounded yearly when you graduate
from kindergarten and did not get the amount until you finish Grade
12. How much will you have in your bank account after 12 years?

Given: P = 10,000 r = 0.5% = 0.005 t = 12 years

Find: F

Solution: The future value F is calculated by

F= P(1+r)t
F = (10,000)(1 + 0.005)12
F = 10,616.78

Answer: The amount will become P10,616.77 after 12 years.

Present Value P at Compound Interest:

The present value or principal of the maturity value F due in t years

any rate r can be obtained from the maturity value formula F= P(1+r) t.

Solving for the present value P,

𝑃(1 + 𝑟)𝑡 = 𝐹 Present Value P at Compound Interest

𝑃(1+𝑟)𝑡 𝐹
= 𝐹
(1+𝑟)𝑡 (1+𝑟)𝑡 𝑃 = (1+𝑟)𝑡 = 𝐹(1 + 𝑟)−𝑡
𝐹 where
𝑃 = (1+𝑟)𝑡 P = principal or present value
F = maturity (future) value
or equivalently r = interest rate
t = term/time in years
𝑃 = 𝐹(1 + 𝑟)−𝑡

Example 1. What is the present value of P50,000 due in 7 years if

money is worth 10% compounded annually?

Given: F = 50,000 r = 10% = 0.1 t = 7 years

Find: P

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Solution: The present value P can be obtained by

P=

P=

P = 25,657.91

Answer: The present value is P25,657.91.

Example 2 How much money should a student place in a time deposit

in a bank that pays 1.1% compounded annually so that he will have
P200,000 after 6 years?
Given: F = 200,000 r = 1.1% = 0.011 t = 6 years

Find: P

Solution: The present value P can be obtained by

P=

P=

P = 187,293.65

Answer: The student should deposit P187,293.65 in the bank.

SOLVES PROBLEM INVOLVING SIMPLE AND COMPOUND

INTERESTS

Example 1. When invested at an annual interest rate of 5%, the amount

earned P10,000 of simple interest in two years. How much money was
originally invested?

Given: r = 5% = 0.05 t = 2 years IS = 10,000

Find: Amount invested or principal P
Solution: P =
P=

P = 100,000
Answer: The amount invested is P 100,000.

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Example 2. How much should you invest at the simple interest is 7.5%
in order to have P300,000 in 2 years?

Given: r = 0.075 F = 300,000 t=2

Find: P
Solution:
P=

P=

Answer: P 260,869.57

Example 3. What are the amounts of interest and maturity value of a

loan for P28,000 at 14% simple interest for 6 years?
Given: P = 28,000 r = 0.14 t=6
Find: Is
Solution:
IS = Prt
= (28,000)(0.14)(6)
Answer: P 23,520
F = P + Is
28,000 + 23,520
Answer: P 51,520

Example 4. Find the maturity value and the compound interest if

P10,000 is compounded annually at an interest rate of 2% in 5 years.

Given: P = 10,000 r = 2% = 0.02 t = 5 years

Find: (a) maturity value F (b) compound interest Ic

Solution:
(a) F= P(1+r)t
F = (10,000)(1 + 0.02)(5)
F = 11,040. 081
(b) Ic = F – P
Ic = 11,040.81 – 10,000
Ic = 1,040.81

Answer: The future value F is P11,040. 81 and the compound interest

is P1,040.81.

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 III. LEARNING TASKS
Follow the directions of each given task. Read and understand each
item carefully and answer honestly.
Learning Task 1

Directions: Read and understand the questions carefully and write the
letter of your answer.

1. Which refers to the interest computed on the principal and also on

the accumulated past interests?
A. Compound Interest B. Interest C. Rate D. Simple Interest

2. What do you call the interest computed on the principal and then
added to it?
A. Compound Interest B. Interest C. Rate D. Simple Interest

3. Which of the following is usually in percent, charge by the lender or

rate of increase of the investment?
A. Compound Interest B. Interest C. Rate D. Simple Interest

4. What do you call the amount after t years that the lender receives
from the borrower on the maturity date?
A. Maturity date B. Maturity value C. Rate D. Time/term

5. It refers to the amount of time in years the money is borrowed or

invested; length of time between the origin and maturity.
A. Maturity date B. Maturity value C. Rate D. Time/term

6. In order to have P250,000 in 5 years, how much should you invest if

the compound interest is 12%?
A. 114,568,71 B. 114,865.71 C. 141,856.71 D. 414,586,71

7. James borrowed P100,000 at 8% compounded annually? How much

will he be paying after 2 years?
A. 116,640 B. 161,640 C. 460,611 D. 640,116

8. Find the maturity value and the compound interest if P15,000 is

compounded annually at an interest rate of 2% in 4 years.
A. P14,646 B. P14,736 C. P15,642 D. P16,236

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9. How much money should you deposit in a bank so that it will
accumulate to P100,000 at 1% simple annual interest for 10 years?
A. P90,909.09 B. P90,919.09 C. P91,990.09 D. P99,909.90

10. Find the simple interest on a loan of P65,000 if the loan is given at
a rate of 20% and is due in 3 years.
A. P38,000 B. P39,000 C. P40,000 D. P41,000

11. Arnie invested $5,000 at a rate of 7.5%. How much did she have
after 6 months?
A. P5,085.1 B. P5,187.5 C. P5,581.5 D. P5,718.7

12. Patrick borrowed P 20,000 to finance a VCR at a rate of 8.25% for

1 years. How much did he repay altogether?
A. P42,572 B. P24,275 C. P23,257 D. P22,475

13. Liam deposited P4000 into a savings account that earned 4 %

interest per year. How much money did he have after 2.5 years?
A. P4257 B. P4,420 C. P4,325 D. P4,450

14. Maria borrowed P36,000 to finance a large-screen television at a

rate of 6.25% for 4.75 years. How much interest did she pay?
A. P10,687.5 B. P10,698.7 C. P10,878.5 D. P10,980.7

15. Brayden deposited P9,000 into a certificate of deposit with a rate of

1.5% for 6 months. How much money did he have in the account after
6 months?
A. P10,687.5 B. P16,108.7 C. P10,878.5 D. P16,180.7

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Learning Task 2

Directions: Solve the following problems involving simple and

compound interests. Show all necessary solutions.

1. Miko borrowed P25,000 at 10% annual simple interest rate.

How much should he pay after 3 years and 6 months?

2. Find the simple interest on a loan of P65,000 if the loan is given

at a rate of 20% and is due in 3 years.

3. How much should you set aside and invest in a fund earning 9%
compounded quarterly if you want to accumulate P200,000 in 3
years and 3 months?

Learning Task 3

Directions: Complete the table below by finding the unknown. Show

your solutions.

PRINCIPAL (P) RATE (r) TIME(t) INTEREST (I)

(a) 2.5 % 4 1,500
36,000 (b) 1.5 4,860
250,000 0.5% (c) 275
500,000 12.5% 10 (d)

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V. REFLECTION

Direction: Write your response in at least 5 sentences.

I have learned that

________________________________________________________________

V. REFERENCES
Commission on Higher Education. 2016. "Chapter 1 Functions." In Teaching Guide
for Senior High School General Mathematics Core Subject, by Commission on
Higher Education, 1-23. Quezon City: Commission on Higher Education.

Department of Education. 2016. "Lesson 1 Functions; Lesson 2 Evaluating

Functions; Lesson 3 Operations on Functions." In General Mathematics
Learner's Material, by Department of Education, 1-20. Pasig: Department of
Education.

Khan Academy. n.d. Algebra I Unit: Functions. Accessed June 2020.

https://www.khanacademy.org/math/algebra/x2f8bb11595b61c86:function
s.
Oronce, Orlando A. 2016. General Mathematics. Manila, Philippines: REX Book Store.

https://www.onlinemathlearning.com/simple-interest-formula.html
http://www.theonlinetestcentre.com/compound-interest-formula2.html
https://www.onlinemathlearning.com/interest-problems.html
https://www.google.com/search?q=simple+and+compound+interest+application&rl
z=1C1CHBF_enPH814PH814
&oq=simple&aqs=chrome.1.69i59l3j69i57j69i59j69i60j69i61j69i60.2410j0j8&sourc
eid=chrome&ie=UTF-8
https://courses.lumenlearning.com/wm-accountingformanagers/chapter/simple-
and-compound-interest/
https://arc.nesa.nsw.edu.au/files/math_st5_act16_ws5.pdf

Compiled by: GLORIFEL B. SAREÑO

MT-1, Math

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