GENERAL MATHEMATICS

SECOND QUARTER

BUSINESS MATHEMATICS
AND LOGIC
 Pre-Test
Choose the letter of the best answer. Write the chosen letter on a separate sheet of paper.

1. Express 10% in decimal.

a. 10.0 b. 100 c. 0.10 d. 1
2. What is 25% of 110?
a. 27.50 b. 28.50 c. 26.50 d. 25.50
3. _____________ is a person (or institution) who invests the money or makes the funds
available
a. Lender c. Employer
b. Lendee d. Employee
4. An amount paid or earned for the use of money is called ______________.
a. Loan c. Investor
b. Interest d. Savings
5. A way of calculating interest that is computed on the principal and then added to it.
a. Calculator c. Simple interest
b. Percentage d. Compound interest
6. If the sum of money placed at compound interest doubles itself in 5 years, how long
will it become 8 times itself at the same rate of investment?
a. 20 years c. 40 years
b. 15 years d. 25 years
7. A way of calculating interest that is computed on the principal and also on the
accumulated past interests.
a. Calculator c. Simple interest
b. Percentage d. Compound interest
8. The formula for computing simple interest.
a. Is = Principal x rate . Is = Principal x rate x time
b. Is = Future value – Principal d. Is = Interest + Principal
9. The formula for computing compound interest.
a. Ic = Future value − Present Value c. Ic = Present value − Future value
b. Ic = Future value − rate d. Ic = Present value − Principal
10. ________________ is an application of Exponential function.
a. Compound interest c. Simple interest
b. Mathematics of investment d. Function
11. How much interest will Mary earn in her investment of Php15,000 at 8% simple
interest for 4 years?
a. Php 4,800 c. Php 5,100

b. Php 5,000 d. Php 5,500

12. Christie made a loan of P25,000 from a lending company that charges 7% simple
interest. How much must she pay after 3 years?

a. Php 5,150 c. Php 5,250

b. Php 5,200 d. Php 5,300

 Objectives:
In this module, you will investigate, analyze, and solve problems involving simple
and compound interests. After going through this module, you are expected to:

1. illustrates simple and compound interests.

2. distinguishes between simple and compound interests.

3. Evaluate simple and compound interest

In the financial concept, the ability to effectively manage one’s finances is essential to
one’s financial survival. We work or do business to earn a living. From this, we use the money
we earn to buy goods and services that will satisfy our needs, wants, and demands. Also, we
use the money to deposit it to banks or investment companies to grow or just keep them
safely at our houses as our savings to realize our plans in the future and as emergency funds.
Thus, there is a need to manage one’s finances intelligently.

Otherwise, we borrow money from a person, the banks or any lending institutions.
When we do this, a debt is made. We need to pay back the money originally borrowed and
also the additional fee charged for the use of the money, called the interest. Interest may be
the fee we need to pay for the use of money or an income from invested capital.

Does this interest you? In this lesson, the students will learn, investigate, and illustrate
simple and compound interest.

What’s In

Interest is charged as a percent of the principal for a definite period

of time. To deal with interest, one should understand the basic concept on how to compute
the amount of interest that one’s borrowed or lend.

Try this! Express each as a decimal.

1. 3% 4. 200%
1
2. 5.5% 5. 10 %
2
3. 0.75%
Express each as percent form.
6. 1 9. . 5025
1
7. 0.20 10. 4
8. 0.020
Answer the following
11. What is 30 % of 50?
12. 70 is what percent of 200?
 A percent is a ratio of a number to 100. To convert a percent to decimal, drop the
percent sign and divide the number by 100. Another method is to drop the percent sign and
move the decimal point two places to the left. If the number in the percent is a whole number,
the decimal point is understood to be placed at the right of the last digit.
Examples: 2% = 0.02 50% = 0.50

100% = 1
357.5% = 3.575
On the other hand, to convert a decimal to percent, multiply the decimal by 100,
then add on the % symbol. Another easy way is to move the decimal point two places to
the right. Notice each decimal in examples below went out two places to the right of the
decimal point.

Examples: 0.25 = 25%

1

Percent problems will be solved using the formula:

FORMULA:
p=rxb

where p is the portion, r is the rate, and b is the base. In the statement “25% of 200 is 50,” 25%
is the rate, 200 is the base, and 50 is the portion.

The most common uses of this formula involve discounts on sale items. If the item has a
sale price of ₱500.00 with a discount of 15%, what is the original price of the item? (Note
that the amount to be paid for a discount of 15% is 100% minus 15% or 85%. Using the
formula, ₱500 is the portion and 85% is the rate, the base can be solved as follows:

85% of x = 500
0.85x = 500
x = 500/0.85
x = ₱588.24

Therefore, the original or regular price of the item on sale at ₱500.00 is ₱588.24.

a) Definition of Terms
Lender or creditor - person (or institution) who invests the money or makes
the funds available
Borrower or debtor - person (or institution) who owes the money or avails
of the funds from the lender
Origin or loan date - date on which money is received by the borrower
Repayment date or maturity date – a date on which the money borrowed or
loan is to be completely repaid
Time or term (t) - amount of time in years the money is borrowed or invested;
length of time between the origin and maturity dates
Principal (P) - amount of money borrowed or invested on the origin date
Rate (r) - annual rate, usually in percent, charged by the lender, or rate of
increase of the investment
Interest (I) - amount paid or earned for the use of money
 Simple Interest (Is) - interest that is computed on the principal and then
added to it. (Is = Prt)
Maturity value or future value (F) - amount after t years; that the lender
receives from the borrower on the maturity date
Compound Interest (Ic) - interest is computed on the principal and also on
the accumulated past interests. (Ic = F-P )
If an amount P is invested at an interest rate r compounded annually, then the
investment will increase to a value A ( future value ), at the end of t years. It
is modeled by the equation. ( 𝑨 = 𝑷(𝟏 + 𝒓)𝒕)
Conversion period (m) – the number of times in a year the interest will be
compounded, i.e., annually (m=1), semi-annually(m=2), quarterly(m=4) and
monthly (m=12).

Illustration of Simple and Compound interests.

Simple Interest Compound Interest

Interest on principal only. Interest on principal and interest
previously earned.
₱200 invested with a rate of 3% for 2 ₱200 invested with a rate of 3% for 2
years. years.
Year 1: interest = ₱ 6 Year 1: interest = ₱ 6
Year 2: interest = ₱ 6 Year 2: interest = ₱ 206 (0.03)
= ₱ 6.18
Total interest: ₱ 12 Total interest: ₱ 12.18

Simple interest paid or received over a certain period is a fixed percentage of the
principal amount that was borrowed or lent. While compound interest accrues and is
added to the accumulated interest of previous periods, so borrowers must pay interest on
interest as well as principal. The table below shows the difference of simple and
compound interests.

Simple Interest Compound Interest

Levied only on the loan amount or Levied on the loan amount as well as its
principal interest

A small percentage of principal and

A small percentage of the principal as
amassed simple interest as mutually
agreed between lender and borrower
agreed

Steady wealth growth Wealth growth increases at a higher pace

due to compounding

Less returns compared to compound Higher returns compared to simple

interest interest
 Wealth growth is comparatively Wealth accumulation will be at a higher
lower rate

Principal never changes with Principal increases as interest

increased tenure compounds and gets added to it

Easy to calculate using the formula Difficult to calculate using the formula Ic
Is = Prt = F-P or 𝑨 = 𝑷(𝟏 + 𝒓)𝒕
- From [Link]
In the last row, simple and discount interest also differs in formula to compute the
amount of interest that one’s borrowed or lend. This will be discussed thoroughly in your
next lesson.

ACTIVITY 1.

Illustration of Simple and Compound interest

Activity 1: Aldy wants to deposit her money ₱ 1, 000 in a savings account. Two banks offer
6% interest per year. Complete the tables below and help her which banks to choose.
Bank A. Simple Interest. Complete the first table that show balance after 10 years with
simple interest. (Note: To get the yearly interest, get the product of the rate and the principal.
Converting the rate 6% to decimal form we get 0.06. Thus, 0.06 x ₱ 1000 = ₱ 60. Hence, the yearly
interest is 60)

t Principal Yearly Interest Balance at End Year

1 1000.00 60.00 1060.00
2 1000.00 60.00 1120.00
3
4
5
6
7
8
9
10

Bank B. Compound Interest. Complete the second table that shows the balance after 10 years
with interest that is compounded annually.

t Principal Annual Interest Balance at End Year

1 1000.00 1000 x 0.06 = 60.00 1000 + 60 = 1060.00
2 1060.00 1060 x 0.06 = 63.60 1060 + 63.60 =1123.60
3
4
5
6
 7
8
9
10

1. Compare the two banks, which bank gives the greater balance?

2. Which bank should Aldy choose and why?

___________________________________________________________________

Activity 2

Suppose you won P10,000 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?
Investment 1: Simple Interest
Time Principal Interest Simple Interest Amount after t years
(t) (P) Rate (r) Solution Answer (Maturity Value)
1 10 000 2% (10 000)(0.02)(1) 200 10 000 + 200 = 10 200
2 10 000 2% (10 000)(0.02)(2) 400 10 000 + 400 = 10 400
3 10 000 2% (10 000)(0.02)(3) 600 10 000 + 600 = 10 600
4 10 000 2% (10 000)(0.02)(4) 800 10 000 + 800 = 10 800
5 10 000 2% (10 000)(0.02)(5) 1 000 10 000 + 1 000 = 11 000

Investment 2: Compound Interest

Time Amount at Interest Compound Interest Amount after t years
(t) the start of Rate (r) Solution Answ (Maturity Value)
year (t) er
1 10 000 2% (10 000)(0.02)(1) 200 10 000 + 200 = 10 200
2 10 200 2% (10 200)(0.02)(1) 400 10 000 + 400 = 10 400
3 10 404 2% (10 000)(0.02)(1) 600 10 000 + 600 = 10 600
4 10 612.32 2% (10 000)(0.02)(1) 800 10 000 + 800 = 10 800
5 10 824.32 2% (10 000)(0.02)(1) 1 000 10 000 + 1 000 = 11 000

Compare the interest gained. What is the difference between simple and compound interests
based on their illustrations?
_________________________________________________________________________________
___________________________________________________________________________
______________________________________________________________________________
Simple interest remains constant throughout the investment term. In compound interest,
the interest from the previous year also earns interest. Thus, the interest grows every year.
Annual Simple Interest
Definition. 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: A bank offers 0.25% annual simple interest rate for a particular deposit. How
much interest will be earned if 1 million pesos is deposited in this savings account for 1
year?
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
Example 2: How much interest is charged when P50,000 is borrowed for 9 months at an
annual interest rate of 10%?

Given: P = 50,000 r = 10% = 0.10 t= year = 0.75 year

Note: When the term is expressed in months (m), it should

Find: Is be converted in years by t = m/12

Solution: Is = Prt. Then, Is = (50,000)(0.10)( 0.75 )= 3,750

Answer: The simple interest charged is P 3,750.
Example 3: When invested at an annual interest rate of 7%, the amount earned
P11,200 of simple interest in two years. How much money was originally invested?
Given: r = 7% = 0.07 t = 2 years Is = 11,200
Find: Amount invested or principal P
𝐼𝑠
Solution: P = . Then
𝑟𝑡

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

Compounded Interest
A starting amount of money (called the principal) can be invested at a certain interest rate
that is earned at the end of a given period of time (such as one year). If the interest rate is
compounded, the interest earned at the end of the period is added to the principal, and this
new amount will earn interest in the next period. The same process is repeated for each
succeeding period: interest previously earned will also earn interest in the next period.
Example 4. Mrs. Santos invested Php 100,000.00 in a company that offers 6% interest
compounded annually. How much will this investment be worth at the end of each year for
the next five years?

Solution: Let t be the time in years. Then we have:

Initially, At t 0, Amount of investment 100,000
At t 1, Amount of investment 100,000 100,000(0.06)
100,000 1 0.06
Php 106,000
At t 2, Amount of investment 100,000 (1 0.06)
100,000 1 0.06 100,000 1 0.06 0.06
100,000 1 0.06 1 0.06
100,000 1 0.06 2

Php 112,360

At t 3, Amount of investment 100,000 (1 0.06)2

100,000 1 0.06 2
100,000 1 0.06 2
0.06
100,000 1 0.06 2
1 0.06
100,000 1 0.06 3

Php 119,101.60
Following the pattern, we can simply solve a certain amount of investment at t period of time.

At t 4, Amount of investment 100,000 (1 0.06)4

Php 126,247.70

At t 5, Amount of investment 100,000 (1 0.06)5

Php 133,822.56

A 100,000 1 0.06 t
or simply A 100,000 1.06 t
.

Compounded Interest

If a principal P is invested at an annual rate of r , compounded annually, then the amount

after t years is given by A P 1 r t .
Example 5. Ana borrowed Php11,500 from Jane at 9% compounded annually. How much
will Jane receive at the end of 5 years?
Given: P = 11,500 r = 0.09 t=5y
t
Solution: A P 1 r
= 11,500 ( 1+0.09 )5
= 11,500 (1.09)5
= 17, 694.18.
Therefore, Jane will receive Php17,694.18 at the end of 5 years.
Example 6. Determine the compound amount of Php16,500 invested at 13% compounded for
6 years?
Given: P = 16,500 r= 0.13 t=6y
Solution:

A
P 1 r t

= 16,500 (1+0.13)6
= 16,500 (1.13)6
= 34,352.20
Therefore, the compounded amount at the end of 6 years is 34,352.20.

What’s More

Activity 3:
1. Complete the table below by finding the unknown.
Principal (P) Rate( r ) Time (t) Interest Is
(a) 2.5% 4 1,500
36,000 (b) 4 4,860
250,000 0.5% (c) 275
500,00 12.5% 10 (d)
2. What is the amount of interest of a loan for P35,000 at 10% simple interest for 7 years?

3. How long will a principal earn an interest equal to half of it at 5% simple interest?

4. How much money will you have after 6 years if you deposited P 15,000 in a bank that
pays 1.5% simple interest?
5. How long will 5 million pesos earn a simple interest of 100,000 at 2% per annum?
6. In order to have P350,000 in 5 years, how much should you invest if the compound
interest is 12% per annum?
7. Peter borrowed P100,000 at 8% compounded annually? How much will he be paying
after 2 years?
8. How much money must be invested to obtain an amount of P250,000 in 3 years if money
earns at 12.5% compounded annually?
9. A time deposit account in a bank yields 5.5% compound interest annually. Jennifer
invested P450,000 for 4 years in this savings account. How much interest will she gain?
10. What amount must be deposited by a student in a bank that pays 3 % compounded
annually so that after 12 years he will have P150,000?

MODULE 2: Solving Problems Involving Simple and

Compound Interest
The module consists of one lesson. It presents the lesson in the following outline.

• Finding the interest, the unknown principal, rate and time of simple annual interest;
• Finding the interest, maturity value and present value of the compound a interest.
After going through this module, you are expected to:

1. Compute simple interest given the principal amount, rate and time;
2. Compute for the unknown principal amount, rate and time;
3. Compute the maturity (future) value of simple interest;
4. Compute for the maturity (future) value of the compound interest, and
5. Compute for the present value of the compound interest
6. Solve problems involving interests

Nowadays, spending money is much easier than earning it. Hence, we must keep in mind to
invest and keep our hard-earned money in to something we can benefit with, like starting a bank
investment and business that we can grow our finances. The banking system is one of the successful
investment sectors that guarantees your hard-earned money will grow as much as you want depending
on the amount you have invested. In this lesson, you will understand how our banks and other
investment companies offer a compounded interest to your investments. You will dig deeper to learn the
basic concept of how to grow your money even if you’re still a student.

Activity 1.1
In your previous module, you learned the differences between the simple annual
interest and the compound annual interest. In this activity, you are asked to review on what
you have learned on your previous modules about the differences between simple and
compound annual interests by drawing a Venn diagram.
Activity 1.2

Supposed you owned Php1,000 today and you wished to turn it to PHP 1 million. Sounds ambitious
right? However, is it possible? Yes it is! The question is, how long will it take for your PHP 1,000 to
become PHP 1 million if you plan to deposit it in a bank that offers 2.3%? Which is best; invest it on
(1.) annual simple interest or in an (2.) annual compound interest? Will you be able to successfully
make it while you’re still alive or not?

Annual Simple Interest

Simple interest is calculated on the principal amount or original amount of money.
From the word “simple”, this means that the interest that can be earned is directly from the
principal amount invested or borrowed. Below is the formula for the Annual Simple Interest:

𝑰𝒔 = 𝑷𝒓𝒕

Where:

𝐼𝑠=simple interest

𝑃=principal amount 𝑟= interest rate t= time or term (duration of investment), in years

Example 1. A bank offers 0.25% annual simple interest rate for a particular deposit. How much
interest will be earned if 1 million pesos is deposited in this savings account for 1 year?
Solution.

Given: P = 1,000,000; r = 0.25% 0r 0.0025 (convert percentage to decimal); t = 1 year.

Find: 𝐼𝑠 = ?

Is = Prt

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

Is = 2,500

Answer: The interest earned is PHP 2,500.00

Example 2. Mr. Balmond plans to deposit his money in an investment company named KAPA-
KAPA that promised to offer 30% annual interest rate. If Mr. Arco wants to invest PHP
20,000.00 in this investment company, then how much interest he will be earning after 3 years?

Solution.

Given: P = 20,000; r = 30% or 0.3 (convert percentage to decimal); t = 3 years.

Find: 𝐼𝑠 = ?

Is = Prt

Is = (20,000)(0.3)(3)

Is = 18,000

Answer: The interest earned is PHP 2,500.00

Example 3. How much interest is charged when you borrowed PHP 50,000 for 9 months at an
annual interest rate of 10%?

Solution.

Given: P = 50, 000; r = 10% or 0.1(convert percentage to decimal); t = 9 months years

( Note that if the term is expressed in months, convert it by dividing the
given months by 12 (number of months in a year))

Find: 𝐼𝑠 = ?

Answer: The interest earned is PHP 3,750

1.2 Finding the Unknown Principal, Rate and Time.

The formula of the simple interest can be a basis to derive the unknown principal
amount, rate and time.

𝐼𝑠 = 𝑃𝑟𝑡

A. The formula if principal P is unknown

B. The formula if rate r is unknown

C. The formula if time t is unknown

Example 4. Complete the table below
Principal Rate Time Interest
(P) (r) (t) (r)
(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)

SOLUTION:

(a) The unknown Principal can be obtained by

(b) The unknown rate can be obtained by

(c) The unknown time can be calculated by

(d) The simple interest can be calculated by

1.3 Solving for the Maturity (Future) Value

The maturity or the future value denoted by letter (F) of the simple annual interest is can be
obtained by adding the principal (P) amount and the interest ( ). Refer to the equation below:

Substituting by gives us

Factor using common monomial

factor
.
𝐹 = 𝑃 (1 + 𝑟𝑡)

Where

F = Maturity (future) value P =

Principal r= rate t = time

Example 5. Find the maturity value if PHP 100,000 is deposited in a bank at an annual simple
interest of 1.5% after (a) 1 year (b) 3 years

SOLUTION:

(a) Given: P = 100,000; r = 0.015; t = 1 year

(b) Given: P = 100,000; r =

0.015; t = 3 years

Annual Compound Interest

Compound Interest is calculated on the principal amount and also on the
accumulated interest of previous periods, and can be regarded as the “interest on interest”.
In other words, at the end of each year, the interest earned is added to the original amount
and the money is reinvested.

The formula for the annual compound interest is provided below: Maturity (Future)

value and Compound Interest

𝐹 = 𝑃(1 + 𝑟)𝑡

Where,

P = Principal or present value F =

Future or maturity value r = interest

rate t = time or term in years

The compound interest denoted by 𝑰𝒄 can be obtained by

𝑰𝒄 = 𝑭 − 𝑷

Example 6. Find the maturity value and the compound interest if P = 10,000 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

Solution:

(a) 𝐹 = 𝑃(1 + 𝑟)𝑡

𝐹 = (10,000)(1 + 0.02)5

𝐹 = 11,040.081

(b) 𝐼𝑐 = 𝐹 − 𝑃
𝐼𝑐 = (11,040.081) − (10,000)

𝐼𝑐 = 1,040.081

Answer: The future value F = 11,040.081 and the compound interest 𝐼𝑐 = 1,040.081.
Example 7. Compute for the maturity value and the compound interest if PHP 13,000 is
invested in a investment institution that offers 7% compounded annual interest for 5 years.

Given: P = 13,000; r = 7%; t = 5

Find: a) maturity value F

b) compound interest

Solution:

(a)

(b)

Activity 1.3 Finding the Unknown!

A. Complete the table below by finding the unknown.

Principal Rate Time Interest
(P) (r) (t) ( )
(a) 0.025% 10 15,000
73,300 (b) 1.5 14,860
36,230 0.5% (c) 100
110,000,000 1.5% 3 (d)

B. After finding the unknown of the data above, compute for the maturity value of each.

Activity 1.4 Finding the Unknown!

Complete the table below by finding the unknown. Show your solution on the space provided
below.
Principal Rate Time Interest ( Maturity value
(P) (r) (t) ) (F)
3,000 4% 6 years (a) (b)
10,000 5.05% 6.75 years (c) (d)
600,000 19.75% 0.83 year (e) (f)

Problems Involving Compound Interest

Sample 4. Finding Future or Maturity Value of Compound Interest

Mr. Isaac Nathaniel is thinking of investing an amount of P30,000 in a time deposit for
15 years. Find the future value if the investment offers 8.5% annual compound interest.
Given: P = 30,000 r =

8.5% = 0.085 t = 15

years

Find: F, since it is looking for maturity value

Solution:

F= P(1+r)t

F = (30,000)( 1 + 0.085)15

F = (30,000)(1.085)15

F = (30,000)(3.3997)

F = 101,991

Answer: The future value F is P101,991.

Example 5: Finding Present Value P of Compound Interest

Mr. Ybanez aims to have his investment grow to P500,000 in 4 years. How much should
he invest in an account that pays 5% compounded annually?

Given: F = 500,000

r = 0.05 t = 4 years

Find: P

Solution:
𝐹
P=

P=

P = 411,351.24

Answer: He should invest P 411,351.24

Problem Involving Compounded More Than once a Year

At this section, you learn that Compound annually and Compounded more than once a year
has no big difference.

Let r be the annual interest such that r . Then, let t be the length of
time such that t1 = time x number of compounding period. That is, the formula F = P(1+r) t of
the compound annually become F = P(1+r1)t1 for the compounded more than once a year.

Note for the number of compounding period.

Always remember the formula in compound interest in dealing compounded more than once a year
to avoid confusion.
Semi – annually means twice a year therefore we should use 2 in dividing rate and multiplying time.

Quarterly means 4 times a year therefore we will use 4 in dividing rate and multiplying time.
Monthly means 12 times a year therefore we will use 12 in dividing rate and multiplying time.
Example 6. Finding the Future or Maturity Value and Interest of Compounded more than
once a year.

Find the maturity value and the compound interest if P10,000 is compounded semi -
annually at an interest rate of 2% in 5 years.

Given:
Since it is compounded
P = 10,000 semi-annually or twice
a year therefore rate (r)
r = 2% = 0.02 becomes r will be divided into 2
and time (t) will be
t = 5 years becomes t1 = 5 (2) = 10 multiplied by 2. That is why, r = 0.02
becomes
Find: (a) maturity value F
r = 0.01 and t = 5 will
(b) compound interest Ic become t = 10

Solution: (a) Solution: (b)

F= P(1+r1)t1 Ic = F – P

F = (10,000)( 1 + 0.01)10 Ic = 11,046.22 – 10,000

F = 10,000(1.01)10 Ic = 1,046.22

F = 10,000(1.104622)

F = 11,046.22

Answer: The future value F is P11,046. 22 and the compound interest is P1,046.22.

Example 7: Finding the Future or Maturity Value and Interest of Compounded more than
once a year.

Mr. Isaac Nathaniel is thinking of investing an amount of P30,000 in a time deposit for
15 years. Find the future value if the investment offers 8.5% compounded quarterly.

Given: P = 30,000 r =

8.5% = 0.085

t = 15 years t1 = 15(4) =

60

Find: F, since it is looking for maturity value

Solution:

F= P(1+r1)t1
F = (30,000)( 1 + 0.02125)60

F = (30,000)(1.02125)60
F = (30,000)(3.5312)

F = 105,936

Answer: The future value F is P105,936.

What’s More

Consider the problem below then answer the questions that follows.

I. When invested at an annual interest rate of 10%, an amount earned Php. 14,000 of
simple interest in three years and 6 months. How much money was originally
invested?
1. What is being asked in the problem?
2. What is the formula you are going to used?
3. How much money was originally invested?

II. A time deposit account in a bank yields 5.5% compound interest annually. Jennifer
invested P450,000 for 4 years in this savings account. How much interest will she
gain?
4. What is being asked?
5. How much is the maturity value of the invested amount?
6. What is the formula to get the compound interest?
7. What is the compound interest?

III. Albert borrows P50,000 and promises to pay the principal and interest at 12%
compounded monthly. How much must he repay after 6 years?

Activity 1.6
Odette and Johnson planned to put up a business which is a gaming hub for online games. They
needed PHP 250,000 as the capital to fully operate the business planned by borrowing the capital into
a lending company in their town. The lending institution has two options which is:

Option 1: They will offer an annual simple interest rate of 15% however they will pay
interest every end of the year for 5 years.

Option 2: They will offer an annual compound interest rate of 10% for 5 years and they
will pay for it after the term.

Task:

1. Compute for each offer in option 1 and option 2.

2. Which option will make a disadvantage for Odette and Johnson?

MODULE 3: SIMPLE AND GENERAL ANNUITIES

The module is composed of one lesson. The discussion of the lesson is outlined in the
following manner:
1. Classification of Annuity
2. Definition of Annuity Terms

3. Simple Annuity

4. General Annuity

After going through this module, you are expected to:

1. Define and identify types of annuity;
2. Illustrate time diagram as cash flow of an annuity;
3. Find the future and present values of Simple and General annuities

Annuities have been used in our society. Government and non-government agencies are using
annuity products to fund their retirement plans. The knowledge of annuity applies to regular
investment for a goal, loans, retirement plan, educational plan, amortization and saving money. This
lesson will help you illustrate, investigate, analyze, and solve problem involving simple and general
annuities.

Activity 1
A. Complete the Interest Frequency of Interest rate per
table below. Compounded conversion or conversion period
Nominal rate (im) compunding (j)
periods (m)
12% Semi-annually 2 (a)
(b) Quarterly 4 4%
9% Monthly 12 (c)
(d) Daily 365 0.03%

B. Provide the answer.

Php 320 000 is invested for 5 years at 8 % compounded quarterly. Give the value of each
variable in the formula 𝐴=𝑃 ( 1+𝑖 )𝑛 where 𝑖= 𝑟𝑚 and n = mt.
a. Principal Amount, P=
b. interest rate, r=
c. conversion period, K =
d. periodic rate, i=
e. time in years, t=
e. total number of conversion periods, f.
Amount or Future value, A=

Activity 2
Read the situation below and provide what is asked.
Mr. and Mrs. Santos were planning to acquire house and lot but have limited budget. They
went to a bank for some advice as to how they could produce enough amount for the down
payment on a house and lot they had chosen. This is the advice of the bank:
If you will invest Php 20 000 at the end of each year for 5 years in an account that pays interest at 10
% compounded annually, you will have the amount of the down payment of the house and lot.
For Sale
House A –price Php 850 740
House B- price Php 1 221 020
House C- price Php 2 110 000
Down payment 10% of the price
No Price increase for the Next Five Years
a. How much is their investment after 5 years?
b. Which house did the couple choose?
b. How much is the present value of the couple’s investment?

Definition of Terms:

Annuity - a sequence of payments made at equal (fixed) interval or periods of time

Payment interval - the time between successive payments

Deferred Annuity - an annuity in which the periodic payment is not made at the
beginning nor at the end of each payment interval, but some later date. Example: Mr. Ken
paid Php 200 000 as down payment for a car. The remaining amount is to be settled by
paying Php 16 200 each month for 5 years with interest of 10.5% compounded monthly.

Perpetuities - a series of periodic payments which are to run infinitely or forever.

Term of an annuity, t - time between the first payment interval and last payment
interval.
Regular or Periodic payment, R is the amount of each payment.
Amount (Future Value) of an annuity, F is the sum of the future values of all payments
to be made during the entire term of annuity.
Present Value of annuity, P is sum of present values of all payments to be made during
the entire term of annuity
Cash Value or Cash Price - down payment (if there is any) plus present value of the
annuity
The future value of the couple’s investment after 5 years is Php 122 102. So the couple chose
House B, since Php 122 102 is 10% of the price of House B as its down payment.
General Annuity

General Annuity - an annuity where the payment interval is NOT the same as the interest
compounding period

General ORDINARY Annuity - a general annuity in which the periodic payment is made
at the end of the payment interval
Example 3:
Julia barrowed an amount of money from Marleah. She agrees to pay the principal plus
interest of 8% compounded quarterly by paying Php 38 973. 76 each year for 3 years.
a) Find the future amount of this annuity.
b) Determine the money barrowed by Julia (or the present value of the annuity).
Example 4:
Teacher Galopo saves Php 5, 000 every 6 months in a bank that pays 0.25% compounded
monthly. How much will be his savings after 10 years?
Solution:
Given: ; yrs; ; periods; 000 ,5 R 10 t 12 m 20 210 n 0025 .012 i
Since the payment is every 6 months, the interest rate of 0.25% compounded monthly must be
converted to its equivalent interest rate that is compounded semi-annually.

Conversion process:

Example 5:
Mrs. Delizo wuld like to buy a television set payable monthly for 6 months starting at the
end of the month. How much is the cost of the TV set if her monthly payment is Php 3,000
and interest is 9% compounded semi-annually?
Activity 3
Identify each given situations whether it represents simple annuity or general annuity.

1) Payments are made at the end of each month for a loan that charges 1.05% interest
compounded quarterly.

2) A deposit of Php 5 500 was made at the end of every three months to an account that
earns 5.6% interest per year compounded quarterly.

3) Deposits are made every 5 months for ten years at 6% per year compounded semi-
annually.

4) A Deposit of of Php 200 every year for 15 years at 10% per year compounded annually.

5) A payment of Php 5 every day for 3 years at 8% per year compounded daily.

Activity 4
Identify each given situations whether it represents ordinary annuity or annuity due.
1) Semi-annual payments of Php 500 was made at the end of each month for 2 years with 5%
interest compounded annually.

2) The rent for the apartment is Php 7 000 and due at the beginning of each month

3) A saving of Php 10 000 was made at the beginning of every three months with 4% interest
compounded quarterly.

Activity 5
Situation 1: Arianne is planning to buy a car .She went to a bank and deposit Php 25,000 at
the end of each year for 5 years at 8% interest compounded annually.

Activity 6
Find the a) present value and b) amount of an ordinary annuity of Php 5,000 payable semi
annually for 10 years if money is worth 9% compounded annually.
MODULE 4: CASH FLOW AND DEFFERD ANNUITY
The module is composed of one lesson but outline in the following manner:
1. Fair Market Value of a Cash Flow
2. Deferred Annuity

After going through this module, you are expected to:

1. Calculate the fair market of a cash flow that includes an annuity.
2. Calculate the present value of a deferred annuity.

This lesson will help you understand the application of annuity in any
situation that involves cash flow of any business entity or individual engages in loans,
mortgages, investments, and the like.

Before we apply the concepts of present and future values of annuities to solve problems
about cash flow, refresh first your understanding about the previous lessons by doing
the following activities.

Activity 1
Determine if the situation exemplifies simple or general annuity.
1) James pays a monthly installment of an appliance with interest rate compounded
monthly.
2) Jayson pays a monthly installment of an appliance with interest rate compounded
annually.
3) Nathaniel saves Php 3,000 every month in a fund that gives 9% compounded
monthly.
4) Merven paid Php 200,000 as down payment for a car. The remaining amount is to be
settled by paying Php 16,200 at the end of every 3 month for 5 years with an interest
rate of 10.5% compounded quarterly.
5) To pay for his debt at 12% compounded semi-annually, Ruben committed 8 quarterly
payments of Php 24, 491.28.
Fair Market Value of a Cash Flow

A cash flow is a term that refers to payments received (cash inflows) or payments or
deposits made (cash outflows). Cash inflows can be represented by positive numbers
and cash outflows can be represented by negative numbers.

The cash flow report is important because it informs the reader of the business cash
position. For a business to be successful, it must always have sufficient cash. It needs
cash to pay its expenses, to pay bank loans, to pay taxes and to purchase new assets.
A cash flow report determines whether a business has enough cash to do exactly this.
Having cash is a key requirement for a business to stay solvent. When a business has
no longer enough cash to pay its dues, it is often declared bankrupt.

The fair market value or economic value of a cash flow (payment stream) on a date
refers to a single amount that is equivalent to the value of the payment stream at that
date. This date is called the focal date.
The concepts about present and future values of ordinary annuity is necessary to
determine the fair market value of a cash flow.
Deferred Annuity
There are annuities that the series of payments will start on a later date. This type of
annuity refers to deferred annuity. A deferred annuity is an annuity that does not
begin until a given time interval has passed. The time between the purchase of an
annuity and the start of the payments for the deferred annuity is referred to as period
of deferral.

The following are examples of deferred annuity in real life:

✓ A credit card company offering its clients to purchase today but to start paying
monthly with their choice of term after 3 months.

✓ A real estate agent is urging a condominium unit buyer to purchase now and start
paying after 3 years when the condominium is ready for occupancy.
 ✓ A worker who has gained extra income now and wants to save his money so that
he can withdraw his money starting on the day of his retirement from work.

Consider the two payment schemes below:

Scheme 1 Scheme 2
Suppose Mr. Gran wants to purchase a What if Mr. Gray is considering another
cellular phone. He decided to pay monthly cellular phone that has a different payment
for 1 year starting at the end of the month. scheme? In this scheme, he has to pay Php.
How much is the cost of the cellular phone 2,500 for 1 year starting at the end of the
if his monthly payment is Php 2,500 and fourth month. If the interest rate is also 9%
interest is at 9% compounded monthly? converted monthly, how much is the cash
value of the cellular phone?

Step 2: Compute the present value of the 3 payments made during the period of
deferral. * P
Example. Mr. Quijano decided to sell their farm and to deposit the fund in a bank.
After computing the interest, they learned that they may withdraw P480,000 yearly for
8 years starting at the end of 6 years when it is time for him to retire. How much is the
fund deposited if the interest rate is 5% converted annually?
Given: R = 480,000 m = 1 j = 0.05 k =5 n = 8
Find P

Solution. The present value of the deferred annuity can be solved as

P=R1−(1+j)−(k+n)j−R1−(1+j)−kj

𝑃=480,0001−(1+0.05)−130.02−480,0001−(0.05)−50.02=2,430,766.23

Therefore, the present value of these withdrawals is Php 2,430,766.23 References

Activity 4
Solve the following problems.
1) CASH FLOW Company A offers P150,000 at the end of 3 years plus P300,000 at the
end of 5 years. Company B offers P25,000 at the end of each quarter for the next 5
years. Assume that money is worth 8% compounded annually. Which offer has a better
market value?
Company A Company B
P150 000 at the end of 3 years P25 000 at the end of each
P300 000 at the end of 5 years quarter for the next 5 years
 ACTIVITY 5.
1) A television set is for sale at Php 13,499 in cash or on installment terms, Php 2,500
each month for the next 6 months at 9% compounded annually. If you were the buyer,
what would you prefer, cash of installment?

2) A loan of Php 30,000 is to be repaid monthly for 5 years that will start at the end of 4
years. If interest rate is 12% converted monthly.
a) The type of annuity illustrated in the problem is a ________.
b) The total number of payments is _________.
c) The number of conversion periods in the period of deferral is ___________.
d) The interest rate per period is ___________.
e) The present value of the loan is ___________.
f) The monthly payment (or regular payment R) is ___________.

MODULE 5: STOCKS AND BONDS

This module is outlined in this manner:

• Lesson 1: Illustrate stocks and bonds.
• Lesson 2: Distinguishes between stocks and bonds.
• Lesson 3: Describes the different markets for stocks and bonds.
• Lesson 4: Analyzes the different market indices for stocks and bonds.

After going through this module, you are expected to:

1. illustrate stocks and bonds. ( M11GM-IIe-1)

2. distinguishes between stocks and bonds. (M11GM-IIe-2)
3. describes the different markets for stocks and bonds. (M11GM-IIe-3) and
4. analyzes the different market indices for stocks and bonds. (M11GM-IIe-4)

In the previous lessons, you learned about annuity. As you go through with this module, you will
need some important concepts of annuity especially in solving the fair price of the bond. To refresh
yourself about annuity, answer the following activity.
Search the meaning of the following Business terms in the Merriam-Webster dictionary.
1. Stock
2. Bond
3. Dividend
4. Coupon

Stocks
Is it possible for you to be part owners of the big companies in the Philippines like
Ayala Corp., Metropolitan Bank and Trust Co., Manila Electric Co., and the like? The
answer is Yes!
Some corporations may raise money for their expansion by issuing stocks. Stocks are
shares in the ownership of the company or corporation. By buying stocks of a certain
company, you become one of the many owners and you are entitled to the earnings of
the company.

Owners of stocks may be considered as part owners of the company. There are two
types of stocks: common stock and preferred stock. Both will receive dividends or
share of earnings of the company. Dividends are paid first to preferred shareholders.
The amount of dividend received by each stockholder is based on par value and not on
the market value.

Owners of the company may opt to sell their stocks at a higher price the moment the
market value has increased. Stocks can be bought or sold at its current price called
the market value. When a person buys some shares, the person receives a certificate
with the corporation’s name, owner’s name, number of shares and par value per
share.
The following scenarios are examples related to stocks.
1. Five years ago, Ms. Salceda bought 500 shares of stocks in a certain corporation
worth Php 48.00 each. Now, each share is worth P60.50.
2. Mr. Tagle bought 1,000 shares of stocks in a corporation that had issued 100,000
shares. This means Mr. Tagle acquired 1% of the total shares.
3. A certain corporation declared to give Php 100,000,000 dividend to the common
stockholders. If there are 1,000,000 shares, then there will be Php 100 dividend per
share.

Bonds
Have you ever thought you could fund big companies or even the government? Big
companies or the government often need large amounts of money for their projects. To
raise money, they can issue bonds. Investors who purchase bonds are essentially
'lenders' to the issuer. However, the investors should be compensated for the lending
their money. Aside from being paid the loan at the end of a fixed amount of time, the
investor also receives regular payments (called coupons), usually every six months.

Bonds are interest bearing security which promises to pay amount of money on a
certain maturity date as stated in the bond certificate. Unlike the stockholders,
bondholders are lenders to the institution which may be a government or private
company. Some bond issuers are the national government, government agencies,
government owned and controlled corporations, non-bank corporations, banks and
multilateral agencies.

Bondholders do not vote in the institutional annual meeting but the first to claim in
the institutional earnings. On the maturity date, the bondholders will receive the face
amount of the bond. Aside from the face amount due on the maturity date, the
bondholders may receive coupons (payments/interests), usually done semi-annually,
depending on the coupon rate stated in the bond certificate
LESSON 2: DISTINGUISHES BETWEEN BONDS AND STOCKS

There are many different ways to invest your money. Each of them has a different levels
of risk and potential return. Stocks and Bonds are two common types of financial
investment. In this lesson, you will learn the basic concepts of financial management of
stocks and bonds.
LESSON 3: Describes the Different Markets for
Stocks and Bonds
Definition of Terms in Relation to Bonds
Bond - interest-bearing security which promises to pay
1) a stated amount of money on the maturity date, and
2) regular interest payments called coupons.
Coupon - periodic interest payment that the bondholder receives during the time
between purchase date and maturity date; usually received semi-annually
Coupon Rate - the rate per coupon payment period; denoted by r
Price of a Bond - the price of the bond at purchase time; denoted by P
Par Value or Face Value - the amount payable on the maturity date; denoted by F
If P = F, the bond is purchased at par.
If P < F, the bond is purchased at a discount.
If P > F, the bond is purchased at premium.
 Term (or Tenor) of a Bond - fixed period of time (in years) at which the bond is
redeemable as stated in the bond certificate; number of years from time of purchase to
maturity date
Fair Price of a Bond - present value of all cash inflows to the bondholder

LESSON 4: Analyzes the different Markets indices

for Stocks and Bonds
A stock market index is a measure of a portion of the stock market. One example is
the PSE Composite Index or PSEi. It is composed of 30 companies carefully selected to
represent the general movement of market prices.
Stock Index Tables
Stock indices are reported in the business section of magazines or newspapers, as well
as online ([Link]
For example, the first row under Bid means that there are a total of 122 traders to
wish to buy a total of 354,000 shares at P21.60 per shares. On the other hand, the
first row under Ask means that just one trader is willing to sell his/her 20,000 shares
at a price of P21.80 per share.

Bond Market Indices

Definition: A Bond market index is a measure of a portion of the bond market.
The main platform for bonds or fixed income securities in the Philippines is the
Philippine Dealing and Exchange Corporation (or PDEx). Unlike stock indices which
are associated with virtually every stock market in the world, bond market indices are
far less common. In fact, other certain regional bond indices which have sub-indices
covering the Philippines, our bond market does not typically compute a bond market
index. Instead, the market rates produced from the bond market are interest rates which
may be used as benchmarks for other financial instruments.

The Bond Market and Government Bonds

Government bonds are auctioned out to banks and other brokers and dealers every
Monday by the Bureau of Treasury. Depending on their terms (or tenors), these bonds
are also called treasury bills (t-bills), treasury notes (t-notes), or treasury bonds (t-
bonds). The resulting coupon rates and the total amount sold for these bonds are
usually reported by news agencies on the day right after the auction. Since these bond
transactions involve large amounts, these bonds are usually limited to banks, insurance
firms, and other financial institutions. The banks may then resell these bonds to its
clients.

Although the coupon rate for bonds is fixed, bond prices fluctuate because they are
traded among investors in what is called the secondary market. These prices are
determined by supply and demand, the prevailing interest rates, as well as other
market forces. As the price of the bond may increase or decrease, some investors may
choose to sell back to banks the bonds they acquired before their maturity to cash in
their grains even before maturity.

Despite the fact that bond investing is considered safer than stock investing, there is still
some risk involved. The most extreme scenario is default by the issuer. In this case, the
investor can lose not only the coupons, but even the money invested in the bond. Bond
investors should thus be aware of the financial condition of the issuer of the bond and of
prevailing market conditions.
 MODULE 6: BUSSINESS AND CONSUMER LOANS

This module presents lessons in the following manner:

1. Business and Consumer Loans
2. Solving Problems on Business and Consumer Loans

After going through this module, you are expected to:

1. Define and business loan and consumer loan
2. Differentiate between business and consumer loan
3. Solve problems involving Business and Consumer Loans

Innovative financing is designed to fuel your business. Managing finance is unarguably

the most important component of any business. There are numbers of elements when
determining the purpose of the loan. The first is whether the loan is primarily for a
business or commercial purpose, or if it is primarily for a consumer purpose.

With the traditional business loan, you can borrow a lump sum of money and repay it
over the next several years with the corresponding interest. A mortgage is a loan in
which property or real state is used as collateral, that the borrower is obliged to pay
back with a predetermined set of payments.

ACTIVITY 1: Identify the following, whether the transactions illustrate a business

loan or a consumer loan. In your answer sheet, write a capital letter B that would
represent a business loan and capital letter C for a consumer loan.

1. Mr. Chua plans to have a another branch for his cellphone repair shop. He applied for
a loan that he can use to pay for the rentals of a new branch.
2. Mr. Covid engaged in a trucking business. He applied a loan in a bank to buy three
more trucks to expand his business.
3. Mrs. Beverly planned to take her family for a summer vacation. To cater the expenses,
she decided to apply for a loan in a bank worth P80,000.
4. George decided to purchase a mini hotel near his workplace. He got a loan worth
P1,000,000.
5. Geraldine applied for a salary loan in a bank worth P60,000 for the renovation of their
residential house.

Activity 2. The activity below will test how well you understand all about the topic.
Give it a try. Good luck!

A. Your family is planning to apply for a loan to purchase a car. You are offered by the
lending corporation the following information regarding the amount you will be
borrowing:

Option 1: A monthly payment of Php 23, 500 for three years.

Option 2: A monthly payment of Php 14, 600 for five years
Which will of the two options will you take? Why?
B. Suppose your mother borrowed in a bank worth P120,000 to buy goods for her sari-
sari store. If her monthly payment is P3,650 on a 3-year loan, what would be the total
amount of interest?

Use scientific calculator to facilitate the computations.

(a) First you have to calculate the total amount paid. That is,

Total Amount Paid = Monthly Payment x Term of a loan x No of months

(b) Calculate the total interest

Total Interest = Total Amount Paid － Amount of Loan

Questions:
(a) What is the total amount paid based on the problem ?

(b) How much is the total amount of interest ?

Answers:
a. P131,400

b. P11,400

Lesson 2: Distinguishes between

Business and Consumer loans
Financially unstable individuals need assistance in addressing financial needs from different
lending establishments through loans, to finance business expansion, for personal or for family
consumption.

Business and Consumer Loans

Definition of terms :

Business Loan - a money lent to an individual intended specifically for business

purposes. It may be used to start a business or to have a business expansion.
Consumer Loan - defined as money, goods or services provided to an individual in the
absence of immediate payment for personal or family use.
Collateral - a borrower’s pledge of specific property to a lender, to secure repayment of
a loan. It may be a real-state or other investments.
Term of the Loan - a maturity date to pay the entire loan in a regular payments over a
set period of time.

Lesson 3: Solving Problems Involving

Business and Consumer Loans
Read the different ideas and information that will surely let you deeply understand the
different concepts about solving business and consumer loan. Enjoy Learning!

Mortgage
A mortgage is a business loan or consumer loan that is secured with a collateral.
Collaterals are assets that can secure a loan. If a borrower cannot pay the loan, the lender
has a right to collateral. The most common collaterals are real estate property. For
business loans, equipment, furniture and vehicles may also be used as collaterals.
Usually, the loan is secured by the property bought. For example, if a house and lot is
purchased, the purchased house and lot will be used as a mortgage property or a
collateral. During the term of the loan, the mortgagor, the borrower in mortgage, still has
the right to possess and use the mortgaged property. In the event that the mortgagor does
wherein the interest remains constant throughout the term of the loan. Chattel
Mortgage is a mortgage on a movable property. not make regular payments on the
mortgage, the mortgagee or the lender in a mortgage can repossess the mortgaged
property. The most common type of mortgage is the fixed-rate mortgage.

To solve problems involving business and consumer loans, we have these examples:

Example 1. Mr. Garcia borrowed P1,000,000 for the expansion of his business. The
effective rate of interest is 7 %. The loan is to be repaid in full after one year. How much
is to be paid after one year?

Solution: Given: 𝑃=1,000,000,𝑗=0.07,𝑛=1. Find F. 𝐹=𝑃(1+𝑗)𝑛=1,000,000(1+0.07)=1,070,000

Therefore, the amount paid after one year is P1,070,000.

Example 2 (Chattel mortgage). A person borrowed P1,200,000 for the purchase of a car.
If his monthly payment is P31,000 on a 5-year mortgage, find the total amount of
interest.

Solution: Given P = 1,200,000 Monthly payment = 31, 000

The total amount paid is given by
Total Amount = (31,000)(12 months)(5 years)
= 1,8600,000
Thus, the total interest is the difference between the total amount paid and the amount
of mortgage;
Total Interest = 1,860,000 – 1,200,000
= 660,000
Therefore the total interest of the 5 year mortgage is 660,000.

Example 3: Ms. Rosal bought a car. After paying the downpayment, the amount of the
loan is P400, 000 with an interest rate of 9% compounded monthly. The term of the loan
is 3 years. How much is the monthly payment?

Solution: Given 𝑃=400,000; 𝑖(12)=0.0; 𝑗=𝑖(12)12=0.0912=0.0075; 𝑛=36

Find: the regular payment R. 𝑅= 𝑃1−(1+𝑗)−𝑛𝑗= 400,0001−(1+0.0075)−360.0075=12,719.89
Therefore the regular payment is P12, 719.89.

Amortization
Amortization is the process of paying a loan and its interest through series of regular
equal payments. A loan to be paid using this scheme is described as amortization loan.
Example 6. A smartphone was bought at an amortized loan of Php 20, 000 with 18%
annual interest to be paid in 5 months.
a. Find the monthly amortization
b. Construct an amortization schedule for this loan.
b. At the end of the first month, the balance of Php 20, 000 will be charged 1.5%.
The monthly amortization as computed, is Php 4,181.79.

The amount of simple interest paid (which has been included in the monthly
amortization) is
Amount of interest = Prt
Amount of interest = (Php 20, 000)(0.0015)(1)
Amount of interest = Php 300.

The amount applied to the principal is the monthly amortization less than the paid
interest. Thus, the amount applied to the principal is
Php 4, 181.79 – Php 300 = Php 3, 881.79
The balance for the second month is technically the amount being loaned at 1.5%
monthly interest. This is simply the difference of the previous balance minus applied to
the principal. That is,
Php 20, 000 - Php 3, 881.79 = Php 16, 118.21

The complete amortization schedule is given below.

Payment Amount of Interest Applied to Balance
Number Payment Payment Principal
20,000.00
1 4,181.79 300.00 3,881.79 16,118.21
2 4,181.79 241.77 3,940.02 12,178.19
3 4,181.79 182.67 3,999.12 8,179.07
4 4,181.79 122.69 4,059.10 4,119.97
5 4,181.79 61.80 4,119.99 0.02
The amount Php 0.02 indicates overpayment. In actual financing situation, the discrepancy is
adjusted to have an exact payment, or zero balance.

Finding the Outstanding Balance

There are two ways in computing the outstanding principal or unpaid balance of any financial
obligation. The first method is called Prospective Method. This is used when all regular
payments are equal. The second method is called Retrospective Method. This method is
applicable when the final payment is irregular, that is, the final payment is not the same as the
regular periodic payments.

The following formula will be used in this section:

Example 7. Mr. Chua made a loan from a bank to be used for the expansion of his
business amounting to Php 935, 000 at 12% compounded semi-annually. If this is to
be repaid by equal payments every 6 months for 10 years, find
a. The semi-annual payment;
b. The outstanding principal just after the 6th payment; and
c. The interest paid and repayment to the principal on the 10th payment.
𝑃𝑅= 81,517.56− 38,575.13=𝑃ℎ𝑝 42,942.43

So, Php 42, 942.43 is the repayment to the principal on the 10th payment found in period
10 of the amortization schedule.

Activity 1: What Am I?
Solve the following problems about Business and Consumer Loan. Show your complete
solutions on a separate sheet of paper.
1. A loan of Php 200, 000 is to be repaid in full after 3 years. If the interest rate is 8% per
annum. How much should be paid after 3 years?
2. For a purchase of a house and lot worth Php 3,800,000, the bank requires 20% down
payment, find the mortgage amount?
3. A car dealer offers a 15% down payment to purchase a car. How much is the
mortgage amount if the cash value of the car is Php 1, 500, 000?

Activity 2: Finding Outstanding Balance

Mr. Sarawat pays quarterly to settle his obligation for 2 years at 8% compounded
quarterly. Find
a. The outstanding principal just after the 3rd payment;
b. The outstanding principal just after the 5th payment;
c. Interest paid and repayment to the principal on the 4th payment.

Activity 4 Fill Me Up!

A loan amounting to Php 10, 000 is to be paid annually for 4 years with an interest
rate part of 5% compound annually. The annual amortization is Php 2,820.11.
Complete the following table, and be guided by the question below.
Period Regular Interest Principal Outstanding
Payment R Compound of Component Balance
Payment of Payment
0 A
1 B 500 2,320.11 7,679.56
2 2,820.11 F G 5,243.54
3 2,820.11 262.18 2,557.93 H
4 2,820.11 134.29 2,685.82 I
TOTALS C D E
a. How much is the amount of the loan? (Outstanding balance at period 0)
b. How much is the first annual payment?
c. How much is total amount of payment?
d. How much is total interest paid?
e. How much is total payment for the principal?
f. For the second payment, how much goes to pay the interest?
g. For the second payment, how much goes to pay the principal?
h. How much is the outstanding balance after the 3rd payment?
i. How much should be the entry in the outstanding balance after the last payment?

Module 7: Propositional Logic;

Syllogisms and Fallacies
Propositional Logic; Syllogisms and Fallacies. The scope of this module permits it to
be used in many different learning situations. The language used recognizes the diverse
vocabulary level of students. The lessons are arranged to follow the standard sequence
of the course. But the order in which you read them can be changed to correspond with
the textbook you are now using.

This module presents lessons in the following manner:

1. Illustrating and Symbolizing Propositions
2. Distinguishing between simple and compound propositions
3. Performing the different types of operations on propositions

After going through this module, you are expected to:

1. Illustrate and Symbolize Propositions
2. Distinguish between simple and compound propositions
3. Perform the different types of operations on propositions
Lesson 1: Illustrating and
Symbolizing Propositions
Propositional logic is a branch of mathematical logic that studies the truth and falsity of
proposition.

Some things can be determined or identify a propositions. Recall the knowledge of 4

kinds of sentences studied in JHS English Subject in which each kind will be helpful to
determine easily a proposition.
4 Kinds of Sentences
1. Declarative sentence is used to make statement of fact, wish, intent, or feeling. It
usually ends with a period. (.)

Example: I love my dog.

The moon is made of green cheese.

2. Imperative sentence is used to state of command, request, or direction. It ends with a

period or exclamatory mark.(. or !)

Example: Pick up the book, please.

Be quiet!
3. Interrogative sentence is used to ask question. It ends with a question mark. (?)

Example: Did you prepare for final examination?

Have you made you’re a decision yet.
4. Exclamatory sentence is used to express strong feeling. It ends with exclamatory
mark. (!)

Example: Don’t talk, get out!

The teacher shouted, “Keep quiet!”
This means that we can easily recognized or identify a propositions by reviewing our
previous knowledge on four 4 kinds of sentences. Only a declarative sentences will be
recognized as a propositions.
In general, a propositions for those sentences under the declarative sentences and failed
to be a declarative sentences are not a propositions. But some declarative sentences failed
to be a propositions. Enough understanding of a definition of propositions will be helpful
to identify a statement if it is proposition or not.

Activity 1: Classify each sentence as declarative, imperative, interrogative, or

exclamatory.
1. Mindanao is an island in the Philippines.
2. Find a number which divides your age.
3. My seatmate will get a perfect score in the logic exam.
4. Welcome to the Philippines!
5. 3 + 2 = 5
6. f(x) = √𝑥(𝑥+1 is a rational function.
7. What is the domain of the function?
8. I am lying.
9. It is not the case that √2 is a rational number.
10. Either logic is fun and interesting, or it is boring.

11. If you are a Grade 11 student, then you are a Filipino.

12. If you are more than 60 years old, then you are entitled to a Senior Citizen’s card, and
if you are entitled to a Senior Citizen’s card, then you are more than 60 years old.

Proposition
A proposition is a declarative sentence that is either true or false, but not both. If a
proposition is true, then its truth value is true, which is denoted by T; otherwise, its truth
value is false, which is denoted by F.

Propositions are usually denoted by small letters. For example, the proposition
p: Everyone should study logic may be read as
p is the proposition “Everyone should study logic.”
If a sequence of propositions is considered, we denote the propositions by 𝑝1, 𝑝2, …
Example 1. Determine whether each of the following statements is a proposition or not.
If it is a proposition, give its truth value.
p: Mindanao is an island in the Philippines.
q: Find a number which divides your age.
r: My seatmate will get a perfect score in the logic exam.
s: Welcome to the Philippines!
t: 3 + 2 = 5
u: f(x) = √𝑥(𝑥+1 is a rational function.
v: What is the domain of the function?
w: I am lying.
𝒑𝟏: It is not the case that √2 is a rational number.
𝒑𝟐: Either logic is fun and interesting, or it is boring.
𝒑𝟑: If you are a Grade 11 student, then you are a Filipino.
𝒑𝟒:If you are more than 60 years old, then you are entitled to a Senior Citizen’s card,
and if you are entitled to a Senior Citizen’s card, then you are more than 60 years old.
Solution. Recall that for a statement to be a proposition, it must be a declarative
sentence, and it should have a truth value of either true or false, but not both true and
false at the same time.
p. This is a declarative sentence, and Mindanao is an island in the Philippines. Hence p
is a proposition.
q. This is an imperative sentence, and so it is not a proposition.
r. The statement is a declarative sentence, but its truth value will only be known after the
logic exam. Nonetheless, it can either be true or false, but not both. Hence r is a
proposition.

Example 2. Classify the following as a true statement, false statement, or neither.

a. x > 5
b. Alabel is the Capital City of the Sarangani Province
c. Moon is made up of cheese.
d. Keep calm.
e. This statement is true.
f. Nike manufactures the world’s best running shoes.
Solution.
a. It can be either true or false. Infinitely many values of x.
b. True statement.
c. False statement.
d. It can be either true or false.
e. It can be either true or false. No given statement.
f. It can be either true or false. No evidence yet.

Definition
Let p be a proposition. The negation of p denoted by ~ p, the statement
“It is not the case that p.”
Example:
a. Proposition: A triangle has three sides.
Negation: It is not the case that triangle has three sides.
Negation in simple English: A triangle does not have a three sides.
b. Proposition: All fish can swim.
Negation: It is not the case that all fish can swim.
Negation in simple English: Some fish cannot swim.

Example 3. Give the negation of each statement.

a. A quadrilateral has four sides.
b. The Philippines is a member of the ASEAN.
c. Whales are mammals.
d. A right triangle has no obtuse angle.
e. Tomato is not a fruit.
f. Parallel lines never intersect.
g. All heroes are not immortals.
h. Some typhoons are not Pacific Ocean-origin.

Solution.
a. It is not a case that quadrilateral has four sides; or
A quadrilateral does not have four sides.
b. It is not the case that Philippines is a member of the ASEAN; or
Philippines is not a member of the ASEAN.
c. It is not the case that whales are mammals; or
Whales are not mammals.
d. It is not a case that a right triangle has no obtuse angle; or
A right triangle has obtuse triangle.
e. It is not a case that Tomato is not a fruit; or
Tomato is a fruit.
f. It is not a case that parallel lines never intersect; or
Parallel lines always intersect.
g. It is not the case that all heroes are not immortals; or
Some heroes are immortals.
h. It is not the case that some typhoons are not Pacific Ocean-origin; or
All typhoons are Pacific Ocean-origin.
 Symbols
Symbols are used to simplify work in logics. If x and y are the frequently used letters in
algebra, the letters p, q, or r are often used to represent proposition in logic. The table
below shows the several symbols for connectives, together with the respective types of
compound proposition.

Connective Symbol Type of Statement

and ∧ conjunction
or ∨ Disjunction
not ~ negation
If…then → conditional
If and only if (iff) ↔ biconditional

Example 4. Convert each compound proposition into symbols.

Let p represent the proposition “He has positive mindset” and
q represent the proposition “ He is a senior citizen.”
a. He has positive mindset and he is a senior citizen.
[Link] does not have positive mindset or he is not a senior citizen.
c. It is not the case that he has positive mindset or is a senior citizen.
d. If he has positive mindset, then he is not a senior citizen.
e. He has positive mindset if and only if he is not a senior citizen.

Solution:
a. p ∧ q : He has positive mindset = p (and=∧) he is a senior citizen.=q
b. ~ p ∨ ~ q : He does not have positive mindset = ~ p ( or =∨) he is not
senior citizen.= ~ q
c. ~ (p ∨ q ): It is not the case that=~ he has positive mind set=p ( or =∨)
he is a senior citizen.= q
d. p → ~ q: If he has positive mindset=p (then=→) he is not a senior
citizen.= ~ q
e. p ↔ q: He has positive mindset=p (if and only if=↔) he is a senior
citizen.=q

Example 5. Write each compound statement in symbolic form using p and q.

a. If I work hard, then I will get a bonus.
b. I weigh over 70kg or I will exercise.
c. A triangle is right if and only if it has 90-degrees angle
d. 3 is prime and odd.
e. It is not a case that mother and son loves each other.

Solution:
a. Let p be the sentence “ I work hard.” and q be the sentence “ I will get a bonus.” : p
→q
b. Let p be the sentence “ I weigh over 70kg.” and q be the sentence “ I will exercise.”: p
∨q
c. Let p be the sentence “A triangle is right” and q be the sentence “ A triangle has 90-
degrees angle.”: p ↔ q
d. Let p be the sentence “3 is prime.” and q be the sentence “3 is odd.”: p∧q
e. Let p be the sentence “Mother loves his son.” and q be the sentence “Son loves his
mother.”: ~ ( p ∧ q)

LESSON 2: Distinguishing Between

Simple and Compound Propositions
A simple proposition is a proposition that cannot be broken down any further into
other component propositions.

A compound proposition is a proposition formed from simpler proposition using

logical connectors or some combination of logical connectors. Some logical connectors
involving propositions p and/or q may be expressed as follows:
not p in symbols, (~p)

p and q (p ˄ q )
p or q (p ˅ q )
If p, then q (p q )
where <, > stand for some proposition.
Example 3. In Example 2, identify the simple components of the compound
propositions and the connectors used.
Compound Propositions:
f: If I wake up early, then I will join the zumba.
Simple Components: I wake up early.
I will join the zumba.
Connectors: If, then ( )
h: Martin will take up STEM or ABM.
Simple Components: Martin will take up STEM.
Martin will take up ABM.
Connector: or ( ˅ )
i: It is not the case that √𝟐 is a rational number.
Simple Component: √2 is a rational number.
Connector: It is not the case ( ~ )
j: Either logic is fun or boring.
Simple Components: Logic is fun.
Logic is boring.
Connectors: Either, or ( ˅ )
Example 4. Let p be “Mike is happy” and let q be “Mike is in love.” Write each statement in
symbolic form using p and q.
a. Mike is happy and in love.
b. If Mike is happy, then he is in love.
c. If Mike is in love, then he is happy.

d. It is not the case that Mike is happy and in love.

e. Mike is happy or in love.
f. If Mike is not happy, then he is in love.
g. If Mike is not in love, then he is not happy.
h. It is not the case that Mike in not happy.
i. Mike is neither happy nor in love.
j. Mike is not in love but he is happy.
Solution.
a. p ˄ q
b. p q
c. q p
d. ~ ( p ˄ q )
e. p ˅ q
f. ~p q
g. ~q ~p
h. ~ ( ~p )
i. ~p ˅ ~q
j. ~q ˄ p

To connect the proposition p to q, use the:

connective symbol which is read as in symbols
˄ and (but, yet, while, even p˄q
though)
˅ or p˅q
If, then p q
~ not ~p

LESSON 3: Logical
Operators

Negation Operator
The simplest logical operator is the negation operator, which is denoted by ~ .

Definition.
The negation of a proposition p is denoted by ~𝒑 : (read as ‘not’ p)
and is defined through its truth table:
P ~p

T F

F T
Example 1. State the negation of the proposition.
p: The story of his life is inspiring .
~p can be read as:
~𝑝1: The story of his life is not inspiring.
~𝑝2: The story of his life is uninspiring.
~𝑝3: It is not true that the story of his life is inspiring.

Example 2. State the negation of the following proposition.

𝑛1: The road is slippery.
𝑛2: 13 is an even number.
𝑛3: Everyone in Visayas speaks Cebuano.
𝑛4: √−25 is a rational number.

Solution. The negation of the propositions are given below.

~𝑛1: ‘It is not true that the road is slippery’, or we can simply say, ‘The road is not
slippery.’
~𝑛2: ‘It is not true that 13 is an even number.’, or ’13 is an odd number’.
~𝑛3: ‘Not everyone in Visayas speaks Cebuano.’
~𝑛4: ‘It is not true that √−25 is a rational number’, or ‘√−25 is not a rational
Number.’

Conjunction Operator
A conjunction allows us to state an expression for two propositions to be true.

Definition
The conjunction of propositions p and q is denoted by p ∧ q : ( p and q )
and is defined through the truth table
p q p∧q
T T T
T F F
F T F
F F F
The propositions p and q are called conjuncts.

The conjunction p ∧ q is true only when both conjuncts p and q are true as shown in its
truth table.
Example 3. Let p and q be the following propositions.
p : The story of his life is inspiring
q:>3
Express the following as English sentences or in symbols, as the case may be.
(a) p ∧ q
(b) p ∧(∼q )
(c) ‘The story of his life is uninspiring and ≤ 3.’
(d) ‘While the story of his life is not inspiring, > 3.’
Solution. The corresponding English sentences are given below.
(a) p ∧ q : ‘The story of his life is inspiring and > 3.’
(b) p ∧(∼q ):‘The story of his life is inspiring and ≤ 3.’ Or ‘The story of his life is inspiring,
yet ≤ 3.’
(c) In symbols, (~p ) ∧(∼q )
(d) In symbols, (~p ) ∧ q
Conjunctions do not always use the word ‘and’. Words like ‘but’, ‘yet’, ‘even though’,
and ‘while’ are also used to flag conjunctions.

Consider the following sentences.

The game is exciting and exhausting.
The game is exciting but exhausting.
The game is exciting yet exhausting.
The game is exciting, even though it is exhausting.
While the game is exciting, it is exhausting.
In ordinary language, these sentences have slight differences. However, in logic, we are
only interested in whether the proposition is true or not. The statements can be
represented by the conjunction p ∧ q, where p: ‘The game is exciting’ and q: ‘The games is
exhausting’.

Disjunction Operator
A disjunction allows us to express alternatives.

Definition
The disjunction of propositions p and q is denoted by p ∨ q : ( p or q )
and is defined through the truth table
p q p∨q
T T T
T F T
F T T
F F F
p q p∨q
The propositions p and q are called disjuncts.

The truth table above shows that in the disjunction p ∨q if at least one of the components
is true the truth value will be true also. It will only become false when both disjuncts p
and q are false.

In ordinary language, ‘or’ takes several meanings. In our case, we use what
Mathematicians call the inclusive or. That is, ‘p ∨q’ means that p is true or q is true or
BOTH are true.

Example 4. Let p, q and r be the following propositions.

p: I am staying at home.
q: Today is a sunny day.
r: The streets are wet.
Express the following propositions in English sentences or in symbols, as the case may
be.
(a) q ∨ r
(b) (~p ) ∨ q
(c) (q ∧(∼r )) ∨ p
(d) ‘Either I am staying at home or today is a sunny day, or the streets are wet.’
(e) ‘Either I am staying at home and today is a sunny day, or the streets are wet.’
(f) ‘Either I am staying at home, or today is a sunny day and the streets are wet.’
(g) ‘Either I am staying at home and today is a sunny day, or I am staying at home
and the streets are wet.’

Solution. The corresponding English sentences are given below.

(a) q ∨ r: ‘Today is a sunny day or the streets are wet.’
(b) (~p ) ∨ q: ‘Either I am not staying at home or today is a sunny day.’
(c) (q ∨(∼r )) ∨ p: ‘Either today is a sunny day or the streets are not wet.’
(d) (p ∨ q) ∨ r
(e) (p ∧ q) ∨ r
(f) p ∨ (q ∧ r)
(g) (p ∧ q) ∨ (p ∧ r)

The propositions
‘Either I am staying at home, or today is a sunny day, or the streets are wet.’
‘Either I am staying at home or today is a sunny day, or the streets are wet.’
in symbols p ∨ (q ∨ r) and (p ∨ q) ∨r respectively, are logically equivalent. We can get rid
of the parenthesis and write p ∨q ∨r instead.
The same manner applies to p ∧ (q ∧ r) and (p ∧ q) ∧r. We can write p ∨q ∨r instead.

Example 5. Let p, q, and r be the following propositions.

p: James is playing basketball.
q: Anton is sleeping.
r: Randy is watching television.
Consider the scenario. On Sunday afternoon, James and Anton went to Randy’s house
for their group study. Randy on the other hand, was too occupied watching NBA finals
that he did not notice his friends’ arrival.
What is the truth value of (~p ) ∨ (q ∧ r)?
Solution. Among the three given propositions, only r is true because Randy indeed is
watching the television. Since James is playing basketball and Anton is sleeping,
propositions p and q are false in the scenario. This means that the conjunction (q ∧ r)
is false, since one of the conjuncts is false. Also, since p is false then its negation (~p )
must be true. Therefore, the disjunction (~p ) ∨ (q ∧ r) is true as one of the disjuncts is
true.
The solution can be summarized in the table below:

Conditional Operator
Conditionals are very important in mathematics since most mathematical statements
are expressible in this form.
The truth table above shows that when the hypothesis is false, regardless of the truth
value of the conclusion, the conditional p → q is true.
Example 6. Suppose that Geebee is a Grade 11 student. Consider the following
conditionals.
p1: If Geebee is in Grade 11, then she is a senior high school student.
p2: If Geebee is in Grade 11, then she is working as a lawyer.
p3: If Geebee has a degree in Computer Science, then she believes in true love

Analyze the truth value of these conditionals.

Activity 1 Proposition or Not

Determine whether each statement is a proposition.
1. I did not get a bonus.
2. x is greater than or equal to -2.
3. “1 + 2”
4. Manila is capital of Philippines.
5. What time is it?
6. Just do it !
7. 0 + 0 = 2.
8. Elephants can fly.
9. This sentence is false.
10. x + y = z.

Activity 2 Distinguishing Between Simple and Compound

Propositions
From the given propositions below, determine whether it is simple or compound
proposition. If it is compound proposition, identify the simple components and the
connective used.
1. If you study hard, then you will get good grades.
2. A proposition is a declarative sentence.
3. Carlo is competitive and hardworking.
4. Biology is the study of life.
5. If I get promoted, then I will stop posting selfies on Facebook.

Activity 3 Negation Transformation

State the negation of the following propositions.
p: She was enrolled in this class.
q: She did not pass the test.
r: She left the room early.
s: 8 >5

Activity 4 Translate me!

Let p, q, and r be the propositions given from activity 1. Express the following in
English sentences or in symbols, as the case may be.
1. p ∧ q
2. 𝑞 ∨ (~𝑟)
3. 𝑝 ∨𝑞∨𝑟
4. 𝑞→(𝑝 ∧ 𝑟)
5. (∼𝑝)↔ (~𝑞)
6. ‘She left the room early if and only if she did not pass the test.’
7. ‘Either she was enrolled in this class and passed the test, or she did not pass the
test and she left the room early.’
8. ‘If she left the room early and she was enrolled in this class, then she passed the
test.’