Time-Value of

Money
Part 2
 ACTUAL AND
APPROXIMATE TIME
Actual and Approximate Time

• Actual time – exact or actual

number of days in any given
month

• Approximate time – all months

within a year contain 30 days
Find the actual and approximate time from March 23
to October 16, 2010.

Actual: 207

Approximate: 203
INTEREST BETWEEN
DATES
When interest is to be computed from a certain date to
another date inclusively, there are four methods of
computations:
1. Ordinary Interest for Actual Time (𝐼𝑜 − 𝐴𝑐𝑡) known
as the banker’s rule
2. Ordinary Interest for Approximate Time (𝐼𝑜 − 𝐴𝑝𝑝)
3. Exact Interest for Actual Time (𝐼𝑒 − 𝐴𝑐𝑡)
4. Exact interest for Approximate Time (𝐼𝑒 − 𝐴𝑝𝑝)

NOTE: Banker’s Rule is the default method of computation to be used

if the interest between dates is not specified.
(used by banks in computing the interest on savings deposits)
ACCUMULATION AND
DISCOUNTING
Accumulation is the process of determining the
amount 𝑭 of a given principal 𝑷 due at a specified time 𝒕.

To accumulate a principal 𝑷 for 𝒕 years, means to solve

for 𝑭 applying the formula:

𝑭=𝑷+𝑰
𝑭 = 𝑷 + 𝑷𝒓𝒕
Discounting is the process of determining the present
value of 𝑷 of any amount due in the future.

To discount the amount 𝑭 for 𝒕 years, means to solve for

𝑷 applying the formula
𝑭
𝑷=
𝟏 + 𝒓𝒕
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
1. Accumulate the amount that the
businessman will pay if he borrows P 25,500
for 2 years at 9¼% simple interest.
F = P + I
F = P + Prt
F = P (1+ rt)
1
𝐹 = 𝑃25,500 ( 1 + (9 + )% 𝑥 2)
4
F = P 30,217.50
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.
Future Value
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

F = P (1+ rt)
unknown
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

unknown
F = P (1+ rt)
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

unknown
F = P (1+ rt)
𝐹
𝑃=
1 + 𝑟𝑡
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

unknown
F = P (1+ rt)
𝐹
𝑃=
1 + 𝑟𝑡
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

unknown
F = P (1+ rt)
𝐹
𝑃=
1 + 𝑟𝑡
 𝟏
2. Discount P 160,200 at 𝟏𝟓 %
𝟓

simple interest from August 9 to

December 25 of the same year.

F = P + Prt Future Value

unknown
F = P (1+ rt)
𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
5
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
5
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
Dec 25
Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
Use Banker’s Rule: 5
No of days
August (31-9) = 22
Sept 30
Oct 31
Nov 30
30 days of Sept April June Dec 25
and November Total 138
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
5
No of days
Total 138

𝑃160,200
𝑃=
1 138
1 + 15 + % 𝑥( )
5 360
 𝟏
2. Discount P 160,200 at 𝟏𝟓 % simple interest
𝟓

from August 9 to December 25 of the same year.

𝐹 𝑃160,200
𝑃= =
1 + 𝑟𝑡 1 + 15 + 1 % 𝑡
5
No of days
Total 138

𝑃160,200
𝑃= = 𝑃151,379.61
1 138
1 + 15 + % 𝑥( )
5 360
3. In how many years will P28, 000
accumulate to P30, 940 at 9%
simple interest?
4. Discount P 5,500 for 11 months
at 14% simple interest.
5. For a principal loaned at 15.6%
simple interest, the amount of P 14,
925 was paid at the end of 4 years
and 4 months. What is the original
sum borrowed?
6. Find the amount due on Feb
10,2005, if the present value on
Dec.13,2004 is P10,100 at 12.4%
simple interest.
7. Accumulate P 2,150 for 2.5
years using 3.6% simple
interest.
8. Discount P16,700 using
9.55% simple interest in 2 ½
years.
9. Discount P 7,800 for 125
days at 7 7/8% simple
interest.
10. A businessman borrows P
9,900 for 2 years and 3 months at
9% simple interest. What amount
must he repay?
SIMPLE DISCOUNT
1. A discount is a deduction from the final
amount F or maturity value MV of a loan or
obligation.
2. It is often called bank discount or
interest-in-advance.
3. The amount of money that the borrower
receives is called proceeds.
Formula for simple discount

𝑫 =𝑭∙𝒅∙𝒕
where:
D – simple discount
F - final amount
d - discount rate
t - time or term of discount
PROCEEDS:
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 − 𝑫
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 − 𝑭𝒅𝒕
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
Final Amount:

𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔
𝑭 =
(𝟏 − 𝒅𝒕)
1. Mr. Parras borrowed P15,800 for 9 months from Ms.
Jane who charged 𝟏𝟏 % simple discount. How
much money is the proceeds?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 − 𝑫
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 − 𝑭𝒅𝒕
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
9
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑃15,800 ( 1 − 11% 𝑥 )
12
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = P 14,496.50
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
𝑡 = 1.29 𝑦𝑒𝑎𝑟𝑠
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
𝑡 = 1.29 𝑦𝑒𝑎𝑟𝑠
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
𝑡 = 1.29 𝑦𝑒𝑎𝑟𝑠
1 year, _____ months, _____ days
2. How long will it take for P 8,800 to

amount to P 10,300, if the discount

rate is 11.25%?
𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝑃8,800 = 𝑃10,300 ( 1 − 11.25% 𝑡)
𝑡 = 1.29 𝑦𝑒𝑎𝑟𝑠
1 year, _____months,
3 14 days
_____

0.29 x 12 = 3.48 months 0.48 * 30 =14 days

3. If the proceeds of a loan of P12, 450 will
be paid with P12, 840 at the end of 1 year
and 9 months. What is the simple discount
rate?
Solution: 𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝟗
𝑷𝟏𝟐, 𝟒𝟓𝟎 = 𝑷𝟏𝟐, 𝟖𝟒𝟎 ( 𝟏 − 𝒅(𝟏 + ))
𝟏𝟐
d=
3. If the proceeds of a loan of P12, 450 will
be paid with P12, 840 at the end of 1 year
and 9 months. What is the simple discount
rate?
Solution: 𝑷𝒓𝒐𝒄𝒆𝒆𝒅𝒔 = 𝑭 ( 𝟏 − 𝒅𝒕)
𝟗
𝑷𝟏𝟐, 𝟒𝟓𝟎 = 𝑷𝟏𝟐, 𝟖𝟒𝟎 ( 𝟏 − 𝒅(𝟏 + ))
𝟏𝟐
d = 0.0174 = 1.74%
4. If you received P1,480,500 for borrowing
P1.5 M payable for two years and six
months, what is the discount rate?
5. How much should Ella borrow if she
needs a cash of P15,200 which will
be repaid in two years with 7.5%
simple discount?
6. Mico wants to borrow P 18, 500 from
Laguna’s Investment House payable in 3
years and 3 months. If the investment
house charges 13% interest-in-advance
what size of a loan would Mico apply
for?
7. If you borrowed P250,000 from a bank
payable for two years and 6 months at
𝟒
𝟏𝟎 % simple discount rate, how
𝟓

much will you receive from the bank?

8. Carmen borrows P 18,000 due in 5
months from a lender who charged a
discount rate of 9.2%. How much was
the discount and the money the
borrower gets?