COURSE CODE: MATHEMATICS OF INVESTMENT

Worksheet Module 1
Section: CBM0018-8
Date: March 30, 2021
Exercise:
Create a promissory note using your own design with the following details
below:
A. Payer – Nicki Minaj
B. Payee – Ariana Grande
C. Issue Date – January 20, 2020
D. Maturity Date – July 3, 2020
E. Determine the Term
F. Face Value – Php 50,000
G. Interest – 11%
Ans:
January 11
February 29
March 31
April 30
May 31
June 30
July 3
Total 165

Promissory Note

Manila, Philippines January 20, 2009

One hundred sixty-five days after date, I promise to pay the order of
Ariana Grande, Php 50,000 Fifty Thousand at payable at 11% per year,
payable at Bank of the Philippine Islands.

Due July 3, 2020

Signed: Nicki Minaj

Elaborate:
I. Identification:
1. Simple interest bearing note It is a kind of promissory note that the
maturity value is equal to the face value plus the amount of interest earned.
2. Issue Date Refers to the date on which the note was written or made and
the date from which interest, if any, is computed on this date.
3. Ordinary Interest Used when interest is computed on the basis of an
assumed 30- day month or 360-day year.
4. Rate of Interest Refers to the percentage of the principal per year and is
generally express in the terms of percent.
5. Simple Interest It is a quick and easy method of calculating the interest
charge on a loan. Simple interest is determined by multiplying the daily interest
rate by the principal by the number of days that elapse between payments.

II. Computations:

1. Determine the exact and ordinary interest on Php 9,250 at 10% from February
14, 2019 to May 14, 2019 of the same year using actual and approximate time.

Solution:

Month Actual Time Approximate Time

February 14 16

March 31 30

April 30 30

May 14 14
TOTAL 89 90

A. Exact Interest using Actual Time B. Exact Interest using Approximate Time

T = 89
F = P (1+ rt)
= 9,250 [1+ (0.10) (89/365)]
= 9,250 [1+ (0.10) (0.243835616)
= 9,250 [1+ 0.024383562]
= 9,250 (1.024383562)
T = 90
F = P (1+ rt)
= 9,250 [1+ (0.10) (90/365)]
= 9,250 [1+ (0.10) (0.246575343)
= 9,250 [1+ 0.024657534]
= 9,250 (1.024657534)
 = Php 9,475.55 = Php 9,478.08

C. Ordinary Interest using Actual Time D. Ordinary Interest using Approximate

Time
T = 89
F = P (1+ rt) T = 90
= 9,250 [1+ (0.10) (89/360)] F = P (1+ rt)
= 9,250 [1+ (0.10) (0.247222222) = 9,250 [1+ (0.10) (90/360)]
= 9,250 [1+ 0.024722222] = 9,250 [1+ (0.10) (0.25)
= 9,250 (1.024722222) = 9,250 [1+ 0.025]
= Php 9,478.68 = 9,250 (1.025)
= Php 9,481.25

2. Find the simple interest on Php 20,000 at 6% simple interest for 4 years.

Solution:
I = Prt
I = (20,000)(0.06)(4)
I = Php 4,800.00

3. Find the principal if the simple interest is Php 6,500 with the rate of 9% for 4 years.

Solution:
𝑰
𝑃=
𝒓𝒕
6,500
𝑃=
0.09(4)
P = Php 18,055.55

4. Find the future value if Sofia has deposited Php 80,000 for 2 years and 9 months
at 10% simple interest.
Solution:
I = Prt
I = (80,000)(0.10)(2.75)
I = Php 22,000.00

F=P+I
F = 80,000 + 22,000
F = Php 102,000

Or

F = P (1+ rt)
F = 80,000 [1+ (0.10)(2.75)]
F = 80,000 (1.275)
F = Php 102,000

5. Find the rate if the simple interest on Php 5,000 is Php 500 after 9 months.

Solution:
𝑰
𝒓=
𝑷𝒕
𝟓𝟎𝟎
r = 𝟓,𝟎𝟎𝟎(𝟎.𝟕𝟓)

r = 0.133 or 13.3%
6. Find the time to accumulate an interest of Php 12,000 when Php 35,000 is
invested at 12% simple interest.

Solution:
𝑰
t=
𝑷𝒓
12,000
𝑡=
35,000(0.12)

t = 2.857 or 2.9 years

Evaluate:
In your own opinion which is more ethically acceptable: The use of ordinary
interest or exact interest? Justify your answer.

Ans. Both produced an exact simple interest and neither distorts the nominal
interest rate as the difference between the two is relatively small however it’s
much better if equal monthly or annually charges are to be applied to not further
the confusions between the lenders and the lendee. Banks should also disclose
all the method or computations of how they arrived with that interest with these
it can avoid computational difficulties in terms of money which required a great
precision and trust.