COMPUTING INTEREST APPLIED to

MORTGAGES, AMORTIZATIONS,
SERVICES/UTILITIES
and on DEPOSITS and LOANS
for Business Mathematics
Senior High School (ABM)
Quarter 1 / Week 8

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 FOREWORD

This self-learning kit will serve as a guide in computing

interest specifically as applied to mortgage, amortization,
and on services/utilities and on deposits and loans. It will be
your aid as you learn new ideas and enrich your existing
knowledge about mathematical business concepts.

In this learning kit, you will gain knowledge in computing

interest specifically as applied to mortgage, amortization,
and on services/utilities and on deposits and loans.
 OBJECTIVES:
K: Familiarize the formulas in finding the interest as applied to
mortgage, amortization, services/utilities and deposits and
loans.
S: Illustrate how interest is computed as applied to mortgage,
amortization, services/utilities and deposits and loans.
A: Appreciate the concept of interest as applied to
mortgage, amortization, services/utilities and deposits and
loans with accuracy.

LEARNING COMPETENCY:
Computing interest specifically as applied to mortgage,
amortization, and on services/utilities and on deposits and loans.
(ABM_BM11BS-Ij-10)

(size14)

I. What Happened

REVIEW/MOTIVATION
Consider the following motive questions:

1. What are some ways to take care of hard-earned money?

2. Did you hear in a family conversation at home when your mother inform
your father that your family is out of budget to pay for the tuition fee of your
elder brother/sister in college? What would be the possible alternate
solutions?

RECALL
A. Definition of Terms and its formula:
Deposit is a sum of money placed or kept in a bank account, usually to
gain interest.

Interest is the amount paid or earned for the use of money.

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Loan is the money lent at interest.

Mortgage is a loan provided by a lender or a bank for which property or

real estate is used as a collateral, until such time the loan will be paid up.

Simple Interest is when the interest on a loan or investment is calculated

only on the amount initially invested or loaned.

Is = PRT
P = the principal amount, R = interest rate, T = time in years

Maturity or Future Value on Simple Interest is the amount after t years; that
the lender receives from the borrower on the maturity date.
F = P ( 1 + RT)

P = the principal amount, R = interest rate, T = time in years

Compound Interest is when the interest is calculated on the initial amount

and on any interest earned.
m mt
i
F = P ( 1 + R)t Ic = F – P F = P (1 + )
m

Amortization is commonly refers to the paying of debt in equal intervals

with series of equal regular cash flow over a certain amount of time.

r n
r n (1+ ) -1
m
P (1+ ) =R [ r ]
m
m

Where P = principal amount, r = annual interest rate

m = periodic payments, n = total payments
R = regular monthly payment

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PRE-TEST:
Solve for the unknown value on Simple and Compound Interest.

A. Complete the table below using Simple Interest.

Principal (P) Rate ( R ) Time ( T ) Interest ( IS )
880,000 9.25% 2.5 1. ________
2. ________ 2% 5 10,000
360,000 3. ________ 2 3,600

B. Fill out the missing part on Compound Interest

Principal (P) Rate ( R ) Time ( T ) Interest ( IC Maturity Value
) (F)
10,000 8% 15 4.______ 5. _______

II. What You Need to Know

DISCUSSION:

Illustrative Examples
A. Simple, Compound Interest and Amortization

1. Suppose you won Php 10,000 and you plan to invest it for 5 years. A
cooperative group offers 2% simple interest rate per year. A bank offers 2%
compounded annually. Which will you choose and why?
Solution:
a). Hint: simple interest
Given: P = 10,000 r = 2% or 0.02 t = 5 years
Find: a.1. The simple interest (IS)
Is = Prt
= (10,000)(0.02)(5)
IS = P 1,000
a. 2. Find the Future value
F = P + IS
= 10,000 + 1,000
Answer = Php 11,000

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 b). Hint: compounded annually
Given: P = 10,000 r = 2% or 0.02 t = 5 years
Find: solving for the future value.
F = P ( 1 + R) t
= 10,000(1 + 0.02)5
= 10,000(1.02)5

= 10,000(1.10408)
Answer = Php 11,040.81
c). Based on the solutions, using compounded interest has a bigger

amount compare to using the simple interest, therefore in investing my

money I would prefer to have compounding interest.

2. Mr. Cruz wants to deposit a certain amount of his money that will reach an
amount of Php 50,000 in the bank for 7 years with a 10% interest
compounded annually, how much should he will deposit?

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

Find: Find the Present value (P)

Solution:

F 50, 000 50, 000 50, 000

P= = = = = 25, 657.87
(1 + r)t (1+ 0.10)7 (1.10)7 1.94872

Answer: The present value is Php 25,687.87

3. Find the maturity value and interest if Php 10,000 is deposited in a bank at 2%
compounded quarterly for 5 years.

Given: P = 10, 000 i (4) = 0.02 t = 5 years m=4

Hint: This problem is Compounding interest more than once a year so use the
formula
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 m mt
i
F = P (1 + )
m

where F = maturity (future) value,

P = principal
i m = nominal rate of interest (annual rate
),
m = frequency of conversion t = term / time in years

Find: (a)F, (b)P

a. Solution
m mt
i
F = P (1 + )
m

0.02 (4)(5) 20
=10, 000 (1+ ) =10, 000 (1.005) =10, 000 (1.104896) =11, 048.96
4

Answer: The future value (F) is Php 11,048.96

b. Find the present value:

P = F - IC = 11,048.96 - 10,000 = 1,048.96
Answer: The interest is Php1,048.96

4. Mrs. Tan avail a bank loan of Php 50,000 and promises to pay the principal
and interest at 12% compounded monthly. How much must she will repay
after 6 years?

Given: P = Php 50, 000 im = 0.12, t = 6, m = 12P

Find: Future value (F)
Solution:
m mt
i
F = P (1 + )
m

0.12 (6)(12)
=50, 000 (1+ ) =(50, 000)(1.01)72 =102, 354.97
12

i m mt
F = P(1 + )
m
Answer: Thus, Mrs. Tan will pay Php 102,354.97 after 6 years.

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B. Mortgage
5. Rex purchased an amortized loan for Php 18,000 to buy a new laptop. The
annual interest rate is 16% to be paid in 3 years. What is your monthly
payment?

Given: P = P18,000, r = 16%, m=12, n=12x3=36

Find: Monthly payment (R)
Solution:
r n
r n (1+ ) -1
P (1+ ) =R [ m
r ]
m
m
0.16 36
0.16 36 (1+ ) -1
18, 000 (1+ ) =R [ 12
0.16 ]
12
12

(1.01333333)36 - 1
18, 000(1.01333333)36 = R [ 0.01333333
]

0.610956598
18, 000(1.6109564)36 = R [ 0.01333333 ]

28, 997.2152 = R (45.821745996)

45.821745996 28, 997.2152

R (45.821745996) = (45.821745996)

R = 632.83

Answer: Rex will have a monthly payment of Php 632.83

6. The price of a semi-concrete house is Php 195,000, the bank requires a 10%
down payment. The cost of the house is financed with a 30-year fixed rate
mortgage at 7.5%. Find the following:
a. The required down payment
b. The amount of mortgage
c. Monthly payment

Given: Price of the house = Php 195,000, Down payment= 10% of the total price
Time = 30 years, Rate = 7.5% or 0.075, m = 12 (periodic payment)
n = 12 x 30 = 360 (total payments)

Solution:
a. Required down payment
Php 195,000 x 0.10 = Php 19,500
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b. Amount of Mortgage = Sale Price - Down Payment
Php 195,000 – Php 19,500 = Php 175,000

c. Monthly Payment
r n
r n (1+ m) - 1
P (1+ ) = R [ r ]
m
m

0.075 360
0.075 360 (1+ ) -1
175, 000 (1+ ) =R [ 12
0.075 ]
12
12

(1.00625)360 - 1
175, 000(1.00625)360 = R [ ]
0.00625

(9.421533905 - 1)
175, 000 (9.421533905) = R [ ]
0.00625

1, 653, 479.2 = R (1, 347.445425)

1, 653, 479.2 1, 347.445425

= R (1, 347.445425)
1, 347.445425

R = 1227.12

Thus, the monthly payment is Php1,227.12.

III. What Have I Learned

EVAUATION:
Solve the following problems:

1. What are the amounts of interest and maturity value of a loan for
P150,000 at 6.5% simple interest for 3 years?
2. In order to have P200,000 in 3 years, how much should you invest if the
simple interest is 5.5%?
3. Thea Mae invested a certain amount at 8% simple interest per year.
After 6 years, the interest she received amounted to P48,000. How much
did she invest?

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4. 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?
5. In a certain bank, Angel invested P88,000 in a time deposit that pays
0.5% compound interest in a year. How much will be her money after 6
years? How much interest will she gain?
6. Find the maturity value and interest if P10,000 is deposited in a bank at
2% compounded monthly for 5 years.
7. How much must Angel deposit in a bank that pays 0.75% compounded
quarterly so that she will have P200,000 after 15 years?
8. What is the nominal rate of interest if P4,000 accumulates to P10,000 in 8
years with interest compounded quarterly?
9. The bank offers you a 20 year mortgage for P200,000 at an interest rate
at 8%. The term of the mortgage is 5 years. What is your monthly
payment?
10. If a condominium is purchased for P1,700,000 and the bank requires
25% down payment, how much is the mortgaged amount?

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 DEPARTMENT OF EDUCATION
SCHOOLS DIVISION OF NEGROS ORIENTAL

SENEN PRISCILLO P. PAULIN, CESO V

Schools Division Superintendent

JOELYZA M. ARCILLA, EdD

Assistant Schools Division Superintendent
Acting CID Chief

MARCELO K. PALISPIS, EdD

Assistant Schools Division Superintendent

NILITA L. RAGAY, Ed.D.

OIC - Assistant Schools Division Superintendent
CID Chief

ROSELA R. ABIERA
Education Program Supervisor – (LRMS)

ELISA L. BAGUIO, EdD

Education Program Supervisor – (SCIENCE & MATH)

MARICEL S. RASID
Librarian II (LRMDS)

ELMAR L. CABRERA
PDO II (LRMDS)

MA. WILMA Q. SEVILLO

Writer

RADHIYA A. ABABON
Lay-out Artist
_________________________________

ALPHA QA TEAM
LITTIE BETH S. BERNADEZ
MERCYDITHA D. ENOLPE
RONALD TOLENTINO
DIDITH T. YAP

BETA QA TEAM
ELIZABETH A. ALAP-AP
EPIFANIA Q. CUEVAS
NIDA BARBARA S. SUASIN
VRENDIE P. SYGACO
MELBA S. TUMARONG
HANNAHLY I. UMALI

ENHANCEMENT TEAM
ANGELICA G. ZAMBRANO
GWEN A. GALVEZ

DISCLAIMER

The information, activities and assessments used in this material are designed to provide accessible learning modality to the teachers
and learners of the Division of Negros Oriental. The contents of this module are carefully researched, chosen, and evaluated to comply with the
set learning competencies. The writers and evaluator were clearly instructed to give credits to information and illustrations used to substantiate this
material. All content is subject to copyright and may not be reproduced in9any form without expressed written consent from th e division.
 ANSWER KEY

10. P1,275,000
9. P 1,656.69
8. R = 11.62%
7. 7. P = 178,738.30
6. 6. F = 11,050.79 IC = 1,050.79
5. F = 90,673.22 IC=2,673.22
4. P = 187,293.65
3. P = 100,000
2. P = 171,673.82
1. I = P 29, 250 P=179,250
EVALUATION

5. 31,721.69

4. 21,721.69
3. 0.5%
2. 100,000
1. 203,500
PRETEST

AUTHOR
MA. WILMA Q. SEVILLO finished her degree in Education at
Colegio de Santa Catalina de Alejandria (COSCA) and
earned her master’s degree at University of Southern
Philippines Foundation. Mrs. Sevillo is teaching at Siaton
National High School, Siaton, Negros Oriental as teacher
III with teaching years experience of 24 years. She is
presently handling mathematics subjects in Senior High
Department of the said school.

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 REFERENCES

Faylogna, F., Calamiong, L., Reyes, R. 2017. General Mathematics, 158-

160. Manila: Vicarish Publications and Trading, Inc.

2016. Learner’s Material for General Mathematics, 137-158. Pasig: Lexicon

Press Inc.

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