Quarter 2 - Module 2: Interest, Maturity, Future and Present Values in Simple and

Compound Interest

Lesson 1: Interest, Maturity, Future and Present Values in Simple Interest

*The text color of your answers should be in “BLUE”

What I Know Assessment

1. A 1. A
2. B 2. B
3. B 3. A
4. C 4. C
5. A 5. A
6. A 6. A
7. C 7. D
8. A 8. A
9. C 9. C
10. D 10. A
11. B 11. B
12. B 12. B
13. C 13. B
14. A 14. A
15. D 15. D

What’s New
1. It is all about both senior high school students, Janice and Jamaica, after
class the two had a conversation about how different they are using their
savings
2. First and foremost, saving money is important because it helps protect you
in the event of a financial emergency. Additionally, saving money can help
you pay for large purchases, avoid debt, reduce your financial stress, leave
a financial legacy, and provide you with a greater sense of financial freedom.
3. No, it is not wrong. Since it is her savings she can spend it however she
likes.
4. She is wise for thinking about her future.
5. ₱2415
6. There are many reasons why I value education, but there is one main reason
why I appreciate it so much. That reason is all due to my loving and caring
parents. Ever since they day I was born my parents always stressed to me
the importance of education because it won’t only help me get a well-paying
 job in the future, but that knowledge is the way to success when it comes to
everyday life. I value education so much because no matter how hard or how
long it takes me to comprehend and learn something at least I’m one step
ahead of someone who isn’t. Overall, education should be something
cherished because not everyone has the chance to go to school and learn.
Education is something that most of us take for granted.

What’s More
Activity 1.1
1. If P = ₱4,500, r = 1.25% and t = 5 years, find the simple interest.
What formula will be used? Is = Prt
How are you going to express the rate in percent? Converting from a decimal
to a percentage is done by multiplying the decimal value by 100 and adding
%
How much is the simple interest? ₱281.25
2. If P = ₱5,000, r = 2% and t = 8 mos., find the maturity value.
Which formula will you use? 𝑭 = 𝑷(𝟏 + 𝒓𝒕) or 𝑭 = 𝑷 + 𝑰𝒔
How are you going to express the time in years? Divide 8 months with 12
𝟐
months and use fraction form which is
𝟑
How much is the maturity value? ₱5066.67

Activity 1.2
1. I = ₱260, F = ₱13,260
2. ₱10,416.67

Activity 1.3
Principal Rate Time Interest Maturity
Value
₱45,000 2% 2.5 years ₱2,250 ₱47,250
₱95,000 1.2% 4 years ₱4,560 ₱99,560
₱105,000 3% 3 years ₱9,450 ₱114,450

Guide Answers:
For the first set of values
a) Interest
b) Is = Prt and 𝑭 = 𝑷(𝟏 + 𝒓𝒕) or 𝑭 = 𝑷 + 𝑰𝒔

For the second set of values

a) Principal
b) By solving the simple interest first then using the formula 𝑭 = 𝑷 + 𝑰𝒔
For the third set of values
𝑰𝒔
a) For finding time, 𝒕 = and for finding interest, Is = Prt
𝑷𝒓
b) Time
Activity 1.4
Principal Rate Time Interest Maturity
Value
₱60,000 5% 3 years ₱9,000 ₱69,000
₱40,000 1 1⁄2 % 2 years ₱1,200 ₱41,200
₱20,000 0.5% 9 mos. ₱75 ₱20,075

What I Have Learned

In doing a business transaction one of the essential things to consider is the
interest because it will be the basis whether you have gained or lost. When the
interest is computed based on the principal it is called simple interest its formula
is 𝑰𝒔 = 𝑷𝒓𝒕. There are other components included in the simple interest formula
such as principal or present value, rate, time, and maturity value. In finding the
𝑰
principal the formula 𝑷 = 𝒓𝒕𝒔 will be used. Meanwhile the rate must be expressed in
percent and in finding its value given the simple interest, principal and time you
𝑰
will use the formula 𝒓 = 𝑷𝒕𝒔 . Moreover, time should be expressed in number of years.
In a simple interest environment, the formula to be used in finding the time is 𝒕 =
𝑰𝒔
. Lastly maturity value can be obtained by adding the principal value and simple
𝑷𝒕
interest or if the simple interest is not given you can use the formula F = P(1 + r)t.

What I Can Do
PROPOSAL
PRINCIPAL TIME RATE INTEREST AMOUNT
₱50,000 3 years 1.10% ₱1650 ₱51,650
₱50,000 5 years 1.25% ₱3125 ₱53,125
₱50,000 8 years 1.75% ₱7000 ₱57,000
Aside from the amount to be yielded at the end of each term what are the other
factors that you can consider?
List down the possible questions that you will ask to the couple to determine
those factors.
When will you need your money?
How much money will you deposit?

Is there any disadvantage in choosing each term? What are those?

If the interest rate rises, you may not be able to meet your payment obligation.
What advice or tips can be given to the couple in choosing the term of interest?
If you do not expect to keep the loan for a long time, then a variable rate may be
the better choice. In addition, a variable rate loan can allow you to borrow a larger
amount of money if your credit is less than perfect. A variable rate loan can result
in a lower payment in the short-term but carries a risk that the rate could rise during
the long-term and produce significantly higher payments.
Quarter 2 - Module 2: Interest, Maturity, Future and Present Values in Simple and
Compound Interest

Lesson 2: Interest, Maturity, Future and Present Values in Compound Interest

*The text color of your answers should be in “BLUE”

What’s New
Questions
1. Is Michael’s computation correct?
Yes
2. Is the bank’s computation fair? Why?
Yes, since it is a detailed computation and it is the exact amount.
3. How much is the difference in the total amount to be paid between Michael’s
computation and the bank’s computation?
₱272
4. Why do you think the bank’s computation yielded more interest?
Since the bank used compound interest in the computation.
5. Do you think the bank committed an error in the computation of the amount to
be paid?
No
6. If the term of payment will be longer what do you think will happen between the
difference of the amount to be paid in Michael’s computation and the bank’s
computation?
It will increase.
7. If you are Michael and you follow the computation made by the bank do you think
there is a way to lessen the amount to be paid at the end of 3 years? How?
Michael should pay the loan amount fully so the interest will stop increasing.

What’s More
Activity 2.1
1. If P = ₱85,500, and r = 1.25% compounded monthly for 1 year, find the
compound interest.
What is the first component that should be find? Maturity level
What formula will be used? 𝑭 = 𝑷(𝟏 + 𝒓)𝒕
How much is the maturity value? ₱86,574.89
How are will you find the compound interest? We can find the compound interest
when we subtract the maturity value and the present value.
How much is the compound interest? ₱1,074.89
 2. If F = ₱50,000 with the rate 1.5% compounded quarterly for 5 years find
the present value and compound interest
Which should be find first present value or compound interest? Present value
How are you going to express the rate in decimal? 0.015
𝑭
What formula will you use in finding the present value? 𝑷 =
(𝟏+𝒋)𝒏
How much is the present value? ₱46,393.68
How will you find the compound interest? By subtracting the maturity value to the
present value.
How much is the compound interest? ₱3,606.32

Activity 2.2
1. F = ₱57,830.22
I = ₱14,830.22
2. P = ₱97,435.81
I = ₱7564.19

Activity 2.3
Present Nominal Interest Interest Time Total Compound Maturity
Value rate (i(m)) compounded per in number of Interest Value
conversion years conversions
period (j) (n)

60,000 3% quarterly 0.0075 3 12 5628.41 65628.41

31576.37 6% semi- 0.03 4 8 8423.63 40,000
annually
Guide Questions:
For the first set of values
a. What unknown variable will you solve first? Interest per conversion period and
total number of conversions.
𝒊𝒎
b. How are you going to find j? 𝒋 = 𝒎
c. What will be n? 12
d. How much is the maturity value? ₱65,628.41
e. How much is the compound interest? ₱5,628.41
For the second set of values
a. What unknown variable will you solve first? Interest per conversion period and
total number of conversions.
𝒊𝒎
b. How are you going to find j? 𝒋 = 𝒎
c. What will be n? 8
d. How much is the maturity value? ₱40,000
e. How much is the compound interest? ₱8,423.63
 Activity 2.4
Present Nominal Interest Interest Time Total Compound Maturity
Value rate compounded per in number of Interest Value
(i(m)) conversion years conversions
period (j) (n)
78,000 4% quarterly 0.01 6 24 21039.30 99039.30
34946.2 12% monthly 0.01 3 36 15053.75 50,000
5

What I Have Learned

1. In finding the total number of conversion period you will multiply frequency of
conversion by time in years.
2. To get the rate of interest for each conversion period the annual rate of interest
will be divided by the frequency of conversion.
3. The formula in getting the compound interest given the present value and
maturity value is 𝑰𝒄 = 𝑭 − 𝑷
4. The formula in getting the present value in a compound interest environment
𝑭
is 𝑷 = (𝟏+𝒓)𝒕 or 𝑷 = 𝑭(𝟏 + 𝒓)−𝒕
5. The formula 𝑭 = 𝑷(𝟏 + 𝒓)𝒕 is used to get the maturity value in a compound
interest environment.
II. In not more than three sentences explain how to compute the compound
interest.
You need to understand and identify the terms first before proceeding to the actual
formula in computing compound interest. The formula in getting the compound
interest is 𝑰𝒄 = 𝑭 − 𝑷

What I Can Do
Loan Schedule
Loan Maturity Value Monthly
Amount t=1 t=2 t=3 t=4 t=5 payment
₱10,000 10,500 11,025 11,576.25 12,155.06 12,762.82 ₱212.71
₱20,000 21,000 22,050 23,152.5 24,310.13 25,525.63 ₱425.43
₱30,000 31,500 33,075 34,728.75 36,465.3 38,288.4 ₱638.14
₱40,000 42,000 44,100 46,305 48,620.4 51,051.2 ₱850.85
₱50,000 52,500 55,125 57,881.25 60,775.5 63,814 ₱1063.57
₱100,000 105,000 110,250 115,762.5 121,551 127,628 ₱2127.13
₱150,000 157,500 165,375 173,643.75 182,326.5 191,442 ₱3190.7
₱200,000 210,000 220,500 231,525 243,102 255,256 ₱4254.27
₱250,000 262,500 275,625 289,406.25 303,877.5 319,070 ₱5317.83
 Loan Application Form

Name: Chelsea Nicole Bitera

Age: 22 Date of Birth: June 14, 1998
Occupation: Financial Manager
Monthly Income: ₱108,500
Sources of Funds: Work
Loan Amount: ₱250,000
Other Sources of Funds: small business
Monthly Payment of Loan: ₱5317.83
Please answer the following questions truthfully:
1. Do you have existing loans from other banks?
No.
2. What is the purpose of the loan?
To buy a car.
3. Can your salary cover the monthly payment of the loan? If not
do you have other resources to pay the monthly payment?
Yes.