INTEREST

• INTEREST - The charge for the privilege of

borrowing money
• Formula for simple interest
• I = PRT
• Where P is the principal
• R – annual interest
• T – interest period (in years)
• Maturity Value
• M = P ( 1 + RT)
 Derived Formulas
𝐼
1. 𝑃=
𝑟𝑡
𝐼
2. 𝑟=
𝑃𝑡
𝐼
3. 𝑡=
𝑃𝑟
4. 𝐹 = 𝑃 + 𝐼
5. 𝐹 = 𝑃 + 𝑃𝑟𝑡
6. 𝐹 = 𝑃 1 + 𝑟𝑡
𝐹
7. 𝑃 = 1+𝑟𝑡
When time is expressed in days, interest could either be
ordinary interest or exact interest. For ordinary interest, one
year is taken as 360 days ( approximate days in a year) hence,
𝐷
𝐼𝑜 = 𝑃 𝑥 𝑟 𝑥
360
Where D is the number of days or the time expressed in days.
For exact interest, one year is taken as 365 days (exact days in
a year) hence,
𝐷
𝐼𝑒 = 𝑃 𝑥 𝑟 𝑥
365

𝐷 𝐷
Take note: that 𝑜𝑟 replaces t in our basic formula I =
360 365
Prt
• Ordinary Interest
𝑑𝑎𝑦𝑠
• I= Pr
360
• Exact Interest
𝑑𝑎𝑦𝑠
• I= Pr
365
• Compute for the interest on a credit purchase
of P30,000 at 8% for 10 and 15 months.

• Find the maturity value of a loan of P5,000

borrowed at interest rate of 15% if it has to be
paid for 18 months.
• Francis wants to know which credit
company offers lower interest at the
same interest rate of 9% if he plans to
borrow a quick cash of P30,000 for 90
days. Company A use ordinary interest
while, Company B applies exact interest.
• Comp A - Io • Comp B – Ie
• P=30,000 • P=30,000
• r=9% • r=9%
• t=90/360 • t=90/365
• i=Prt • i=Prt
• i=30,000x0.09x90/360 • i=30,000x0.09x90/365
• i=30,000x.09x.25 • i=30,000x.09x.2466
• i=30,000 x .0225 • i=30,000 x .0222
• i= P675.00 • i= P666.00
Methods in computing for the time
• Exact or actual time – this the actual
number of days between two dates.
*general rule: exclude the first day and
include the last day in counting the exact
number of days.
• Approximate time – this method
consider that there were 30 days in each
month or 360 days in one year.
• Find the exact and approximate time
between the following two given dates:
a. March 12 to September 20, 2019
b. August 6, 2019 to October 5, 2020
 a. Exact time = 192, Approx = 188
b.Exact =426, Approx = 419
By Counting
March (31-12) 19 Year Month day
April 30
May 31 2019 9 20
June 30
July
Aug
31
31
2019 3 12
Sept 20
0 6 8
192 days

By Using Table
Sept 20
March 12 -71
263 (6 x 30)+8 = 188days
192 days
 a. Exact time = 192, Approx = 188
b.Exact =426, Approx = 419
By Counting Year Month day
Aug 6, 2019 to Aug 6, 2020 – 1year = 365days
2020 9 35
Aug (31-6) 25 2019 8 6
Sept 30 1 1 29
Oct 5 60days
425 days 1 year =360 days
1month=30days
By Using Table 29 days
Aug 6,2019–Aug 6,2020 =365days 419 days
Oct 5 278
Aug 6 -218 60 days
426 days
• If P4,000.00 is invested at 8% from
August 6, 2019 to October 5, 2020
compute for the following:
a) Io using exact time
b) Io using approximate time
c) Ie using exact time
d) Ie using approximate time
•Find the ordinary
interest and the
maturity value on
P6,200 at 7 ¾% for 65
days using exact time.
• Using exact time, find the
ordinary interest on
P6,400 at 9 ¾ % from
January 25, 2019 to
February 20, 2021.
• What is the principal amount
invested on July 6, 2019 will
amount to P12,000 on
December 12, 2019 if the rate
is 9.5% and exact interest for
the exact time is used?
•Find the exact interest
and the maturity value
on P6,200 at 7 ¾% for
65 days using
approximate time.
• Using approximate time,
find the exact interest on
P6,400 at 9 ¾ % from
January 25, 2019 to
February 20, 2021.
• What is the principal amount
invested on July 6, 2019 will
amount to P12,000 on December
12, 2019 if the rate is 9.5% and
ordinary interest for the
approximate time is used?
• On May 30, 2020 a businessman
loans P15,000 in the bank for the
expansion of his restaurant. It
was agreed that he will pay the
amount with 6% rate of interest
on August 10, 2020. what is the
ordinary interest using exact
time?
• Principal amount is P15,000.
• Rate of interest is 6%.
• Counting the number of days from May 30 to August 10;
• Note: Since May 30 is the beginning date, it is not included in
counting.

• Total 72 days
Using the formula for solving the simple interest;
• Io = Principal x Rate x Time
𝟕𝟐
• Io = P15,000 x 6% x 𝟑𝟔𝟎

• Io = P15,000 x 0.06 x 0.2

• Io = P180
• Louie borrowed P1,800 from
his aunt last December 25,
2018. he promised that he will
pay his aunt on February 14,
2019 at 8% interest. Find the
exact interest using
approximate time?
• Principal amount is P1,800.
• Rate of interest is 8%.
• Counting the number of days from December 25 to
February 14;

• Using the formula for solving the simple interest;

• Ie = Principal x Rate x Time
𝟒𝟗
• Ie = P1,800 x 8% x 𝟑𝟔𝟓

• Ie = P1,800 x 0.08 x 0.1342465753424658

• Ie = P19.33
• An employee loans P800
from the labor union and
promised to pay the
amount in 1 year. How
much will he need to pay
after 1 year if the interest
rate is 15%
•Find the principal
invested at 4% for 8
months if the
interest is P20.
• A man paid his friend P242
on the money he
borrowed. If there is an
interest of P24, how much
money did the man
borrow? At what interest
rate?
•A rich man wants
` to
earn to 1 million in 10
years. What amount
should he invest in the
bank if the interest rate
is 2.5%
• Juan avail a loan of
P80,000 from the financing
institution and promised
to pay the amount in one
and a half year. How much
will he need to pay after, if
the interest rate is 12%
•A Peter wants
` to earn to
5 million in 15 years.
What amount should he
invest in the bank if the
interest rate is 3.5%
• A John paid Anna P26,000
on the money he
borrowed. If there is an
interest of P2,400, how
much money did John
borrowed? At what
interest rate?
• What is the principal amount
invested on June 12, 2019 will
amount to P120,000 on
December 25, 2019 if the rate
is 8.5% and ordinary interest
for the approximate time is
used?
• Juan avail a loan of
P70,000 from the financing
institution and promised
to pay the amount in one
and a half year. How much
will he need to pay after, if
the interest rate is 13%
• A John paid Anna P28,000
on the money he
borrowed. If there is an
interest of P3,400, how
much money did John
borrowed? At what
interest rate?
•A Peter wants
` to earn to
3 million in 12 years.
What amount should he
invest in the bank if the
interest rate is 4.5%
• What is the principal amount
invested on June 12, 2019 will
amount to P120,000 on
December 25, 2019 if the rate
is 8.5% and exact interest for
the exact time is used?