SIMPLE INTEREST

I.

1. Find the present value of ₱86,000 at 8% simple interest for 3 years?

Given: F = ₱86,000 r = 8% = 0.08 t = 3 years

Find: P F = P(1 + rt)

Solution:

P = F/1+rt
=86,000 / 1 + (0.08)(3)
=86,000 / 1 + 0.24
P = ₱69,354.84

The amount invested is ₱69.354.84.

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

Given: P r=5% = 0.05 I = 1/2P = 0.5P

Find: t t= Is/Pr

Solution:

t = 0.5P / P(0.05)
=0.5P / 0.05P
=0.5 / 0.05
t = 10 years

It will take 10 years for a principal to earn half of its value at 5% simple annual interest.

3. Find the maturity value if 1 million pesos is deposited in a bank at at annual simple interest
rate of 0.25% after 5 years?

Given: P = 1,000,000 r = 0.25% = 0.0025 t=5

Find: F

Solution:

F=P+I
Is = Prt
Is = (1,000,000)(0.0025)(5) F = P(1 + rt)
Is = 12,500 F = 1,000,000(1 + (0.0025)5))
F = 1,000,000 + 12,500 F = 1,000,000(1,0125)
F = 1,012,500 F = 1,012,500

The future or maturity value after 5 years is ₱1, 012, 500.

 COMPOUND INTEREST

II.

1. Find the maturity value and interest if ₱ 50,000 is invested at 5% compound annually for 8
years.

Given: P = 50,000 r = 5% 0.05 t = 8 years

Solution:

Find:
(a) Maturity value (F) (b) Compound interest (Ic)
F = P(1 + r) Ic = F – P
F = (50,000)(1 + 0.05)⁸ Ic = 73,872.77 – 50,000
F = ₱73,872.77 Ic = ₱23,872.77

2. 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

Solution:

Find:
(a) Maturity value (F) (b) Compound interest (Ic)
F = P(1 + r) Ic = F - P
F = (10,000)(1 + 0.02)⁵ Ic = 11,040.81 – 10,000
F = ₱11,040.81 Ic = 1,040.81

3. Suppose your father deposited in your bank account P10, 000 at an annual interest rate rate
of 0.5% compound yearly when you graduate from kindergarten and did not get the amount
until you finish Grade 12. How much will you have in your bank account after 12 years?

Given: P = 10,000 r = 0.5% = 0.005 t = 12 years

Solution:

Find: Maturity value (F)

F = P(1 + r)
F = (10,000)(1 + 0.005)¹²
F = ₱10,616.78