8/1/23

Math 100
Mathematics in the
Modern World
This course deals with nature of mathematics,
appreciation of its practical, intellectual and
aesthetic dimensions, and applications of
mathematical tools in daily life.

Instructor: Alexander H. Am-una, MAEd, LPT

Mathematics of Finance
Learning Objectives
At the end of the lesson, I should be able to:

Understand Use
the concepts of interest, annuity, mathematical formulas and
stocks, and funds and their techniques to analyze and evaluate
importance in finance; different financial options;

Apply Communicate
their knowledge of finance and their understanding of the
mathematics to make informed mathematics of finance to others,
financial decisions; and both verbally and in writing

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How can I achieve financial wellness?

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Borrowing and Lending

What amount of interest will be charged on ₱30,000 borrowed for 3
years at a simple interest rate of 12% per annum?

Interest (I) – is the fee or rent that lenders charge to the borrowers
for the temporary use of the borrowed money
Principal (P) – the amount borrowed
Rate of interest (r) – the percentage of the principal that will be
charged for specified period of time (t) (e.g. daily, weekly, monthly,
yearly, etc)
Future or maturity value (F) – the total repayment which is
composed of the principal and interest

Borrowing and Lending>Simple Interest

Simple Interest - calculated only on the original principal amount
and is paid at the end of the loan period.

P = Principal amount of the loan or investment

r = annual rate of simple interest
t = time period (term) of the loan or investment
F = maturity value of the loan or investment

!
I = Prt P = "# F=P+I F = P(1 + rt)

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Borrowing and Lending>Simple Interest

Example 1: What amount of interest will be charged on ₱30,000
borrowed for 3 years at a simple interest rate of 12% per annum?
I = Prt
I = (30,000)(0.12)(3)
I = ₱ 10,800
The principal will earn an interest of ₱ 10,800.

Example 2: If a 9-month term deposit at a bank earns a simple interest

of 9% per annum, how much will have to be deposited to earn ₱ 2,250
of interest?
! $$%& $$%&
P = "# = &.&((&.*%) = &.&,*% = ₱33,333.33
₱33,333.33 must be placed in the 9-month term deposit to earn ₱2,250 of interest

Borrowing and Lending>Simple Interest

Example 3: What is the present value of ₱5,275 due in 6 months if 11%
interest is paid?
F = 5,275 r = 11% t = 6 months = 0.5 years
- %$*% %$*%
F = P 1 + rt → P = ./"# = ./(&...)(&.%) = ./&.&%%% = 5000
The present value is ₱ 5,000
Example 4: Maria paid ₱ 9,250 on a loan made 6 months before at 12%
simple interest. Find the interest generated.
F = 9,250 r = 12% t = 6 months = 0.5 years
0 (,$%& (,$%&
F = P 1 + rt → P = = = = 8,726.42
./"# ./(&..$)(&.%) ./&.&,
F = P + I → I = F – P = 9250 - 8726.42 = ₱ 523.58
The interest is ₱ 523.58

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Borrowing and Lending>Simple Interest

Example 5: Jenny makes an investment by lending ₱24,000 to Bart for
2 years at an interest rate of 11% per annum. What is the maturity
value of the investment?
P = 24,000 r = 11%=0.11 t = 2 years
F = P 1 + rt = 24,000 [1 + 0.11 2 ] = 29,280
Bart will pay Jenny ₱ 29,280
Example 6: Abe placed ₱ 18,000 in a 240-day term deposit earning 8.5% per
annum. How much will the bank pay Abe on the maturity date?
$2&
P = 18,000 r = 8.5%=0.085 t = 3,&
240
F = P 1 + rt = 18000 1 + (0.085)( ) = 19,020
360
The bank will pay Abe ₱ 19,020.

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Borrowing and Lending>Simple Interest>Seatwork

1. Find the interest paid by Veronica on ₱ 35,000 that he borrowed for
2 years at 15% simple interest.
2. The repayment on a loan was ₱ 13,670. if the loan was for 15
months at 12% interest a year, how much was the principal.
3. How much final amount would Andy receive if he invests ₱ 100,000
for 1 year and 3 months at 11% simple interest?

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