SIMPLE INTEREST

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 INTRODUCTION
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.
1. Debtor or maker - the person who
borrows money for any purpose T
2. Lender - the person or institution
which loans the money E
3. Interest - the payment for the use
of borrowed money
R
4. Principal - the capital or sum of
M
money invested
S
5. Rate of interest - the fractional part
of the principal that is paid on the
loan T
6. Time or term - the number of units
of the time for which the money is
borrowed and for which interest is
E
calculated
7. Final amount or maturity value - the
sum of the principal and interest
R
which is accumulated at a certain
time
M
S
8. Present value - the amount received
by the borrower
 SIMPLE INTEREST

Is interest in which only

the original principal
bears interest for the
entire term of the loan
 COMPOUND
INTEREST
Is 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
E
rate of 12% per year. If the loan X
is a simple interest loan, then
the interest on P10,000 is
A
P1,200. At the end of one year, M
John F should pay the lender a
total amount of P11, 200.
P
L
E
Formula: 𝑰 = 𝑷 ∙ 𝒓 ∙ 𝒕

where:
𝐼 - simple interest
𝑃 - principal amount
𝑟 - rate or percent of interest
𝑡 - units of time (usually in years)
𝑭=𝑷+𝑰
𝑰=𝑭−𝑷
where:
𝐼 - simple interest
𝑃 - principal amount
𝐹 - final amount
 SIMPLE INTEREST
The term or time may be stated in any of
the following ways:

1. When the time is expressed in

number of year(s), our formula will be:
𝐼 = 𝑃 × 𝑟 × 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒚𝒆𝒂𝒓𝒔

2. When the time is expressed in number

of month(s):
𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒎𝒐𝒏𝒕𝒉𝒔
𝐼= 𝑃 × 𝑟 ×
12
A. Express the following in decimal form:
1.) 1.25%
2.) 96%
3.) 5 1Τ2 %
4.) 25 3Τ4 %
5.) 0.17%

B. Express the following in years:

1.) 36 months
2.) 6 months
3.) 75 months
4.) 15 months
1.Find the interest and amount
on P 800 at 6 ½ % simple
interest for 5 years.

2. Find the interest and amount

on P900 at 7 ¼% simple
interest for 9 months.
C. Find the missing value:

1.) 𝑃= P 2,300
𝑟= 4%
𝑡= 3 ¼ years

2.) 𝑃= P 5,500
𝐼= 610
𝑟= 7 7Τ8 %
1. If a principal of P 2,500 earns 𝐴
interest of P185 in 3 years and 3 𝑝
months, what interest rate is in
𝑝
effect?
𝑙
2. A principal earns interest of P 385 in 𝑖
2 years and 9 months at a simple 𝑐
interest rate of 9.5 %. Find the
principal invested. 𝑎
𝑡
3. How long will it take for P8,000 to 𝑖
earn P2, 400, if it is invested at 6½%
𝑜
simple interest?
𝑛
1. Pilo borrowed P 45,000 for 2 years and S
8 months and paid P 3, 750 interest.
What was the simple interest rate? W
5
2. Pam loans P 18, 500 at 9 % simple
6
E
interest, how long will it take her to get
P 6,800 interest?
O
3. Four months after borrowing money, A
Tonton C. pays an interest of P 2, 750. R
How much did he borrow if the simple
1 T
interest rate is 12 %?
8
4. A certain investment earns P2,000 in K
18 months at a rate of 8% simple
interest. How much is the principal
investment?
 PROBLEMS

1. Find the interest and amount on P120, 000 at 4 1Τ4%

simple interest for 15 years.
2. If the simple interest rate is 7.5% and the amount of the
principal is P2,500, determine the future amount at the end
of 20 months.
3. A certain investment earns P2,000 in 18 months at a rate
of 8% simple interest. How much is the principal
investment?
4. If a principal of P2,500,000 earns interest of P 580, 125 in
3 years and 3 months, what simple interest rate is in
effect?
5. How long will it take to accumulate P5,000 to P7,000 if
simple interest rate is 8%?