Simple Interest

Learning Objectives

The Student will be able to:

• Define or explain of the following terms, mathematics of investment,

interest, simple interest, simple discount, equivalent rate, rate,
investor, debtor, principal, term, promissory note, ordinary interest,
exact interest, compound interest, compound amount, conversion
period and banker’s rule.
• Computing the simple interest, rate, time and future value.
• Computing actual and exact time.

Simple Interest

The following variables will be in our mathematical treatment of simple internal:

P= Principal amount invested/or borrowed
r= Amount rate of interest
t= Time period (term of the loan or investment)
I= Amount of interest earned or received
F= Maturity value of the loan or investment

FORMULA:
I=Prt Formula to find simple interest
𝐼
P=𝑟𝑡 Formula to solve for the principal
𝐼
r=𝑃𝑡 Formula to solve for the rate
𝐼
t=𝑃𝑟 or Formula to solve for the time
𝐹−𝑃
t= 𝑃𝑟
F= P+I or F= P (1+rt) Formula to solve for Future value
Example for computing the simple interest:

Problem: Find the ordinary interest on a ₱15,000 loan for 9 months at an interest
1
rate of 102 % per annum?

Given:
P= ₱15,000
1
r= 102% or.105
9
t= 9 months or year = .75 year
12

Solutions:
I=Prt
= (₱15,000) (.105) (.75)
= ₱1,181.25

Example for computing the Principal:

Problem: If Mr. Paul Fernandez paid an interest of ₱5,750 for a loan obtained
1
at 10% per annum for 2year, what is the original loan?

Given:
6
I= ₱5,750 t= 6 months or 12 year
r= 10%

Solution:
𝐼 ₱5,750 ₱5,750
P=𝑟𝑡 = 6 =
(.10)( ) .05
12
= ₱115,000

Example for computing the rate:

Problem: Miss Grace borrowed ₱150,500 from his company. If she paid an
interest of ₱27, 750 for 2 years. what is the rate of interest?

Given:
P= ₱150,500 I= ₱27, 750
t= 2 years
 Solution:
𝐼
r=𝑃𝑡
₱27,750
=₱150,500(2)
₱27,750
= 301,000
= .092192691
= 9.22%

Example for computing the time:

Problem: How long it take to accumulate ₱3,500 to ₱3,575 if interest rate is
1
84%?

Given:
I= ₱ 75
P= 3,500
1
r= 84% or .0825

Solution:
𝐹−𝑃
t= 𝑃𝑟
3,575−3500
= 3,500(.0825)
75
=288.75
360
=.2597 x 1 𝑦𝑒𝑎𝑟
= 93.51 days or 3months and 1.51 days

Problem: The internet earned on a ₱6,000 term deposit was ₱750. How long was the
term if the interest rate was 10% per year?

Given:
P= 6,000 r=10% or .10
I= 750

Solution:
I
t=Pr
 750
= 6,000(.10)
750
=600

= 1.25 years or 1 year and 3 months

Example for computing the Maturity Value:

1
Problem: Maryrose makes an investment by lending ₱25,500 to Paul for 12 years at an
interest rate of 8% per year. What is the maturity value of the investment?

Given:
P= 25,500 r= 8% or .08
1
t= 12 years or 1.5 years

Solution:
F=P(1+rt)
=25,500 [1+(.08)(1.5)]
=25.500 (1.12)
= 28,560
Computing the Actual and Approximate time

Example no.1

Find the Actual and Approximate time from Feb.25, 2019 to August 18, 2019.

Solution:

Actual Time Approximate Time

Feb. 28-25 = 3 Feb. 30 – 25 = 5

March - 31 30
April - 30 30
May - 31 30
June - 30 30
July - 31 30
Aug. - 18 18
174 173

Example no.2

Find the actual and approximate time from May 22, 2019 to September 25, 2019.

Actual Time Approximate Time

May 31- 22 = 9 May 30- 22 = 8
June 30 30
July 31 30
Aug. 31 30
Sept. 25 25
126 123