ATENEO DE DAVAO UNIVERSITY

Km. 7 Central Park Blvd, Talomo, 8016 Davao City, Philippines

Tel No. +63 (82) 221.2411 local 6200
E-Mail: shs@addu.edu.ph * www.addu.edu.ph

In Consortium with Ateneo de Zamboanga University and Xavier University

SENIOR HIGH SCHOOL – GENERAL MATHEMATICS

Year Level: Grade 11

Semester/Grading Period: 1st Semester
Lecture Note no.: 5
Week/Session: Week 7

Topic: Simple and Compound Interest

Lecture/Discussion:

Motivation
Scenario: Suppose you received your inheritance money amounting to Php260,000. You
want to invest your money considering to options.

Option 1: 10% simple interest per year over 5 years

Option 2: 8.5% compound interest per year over 5 years

Questions:

1. How do we solve the interest problem in both simple and compound interest?
2. How much interest will be earned in both problems at the end of 5 years?
3. How do we calculate the Total Amount in both simple interest and compound interest
problems?

I. Learning content

Definition of Terms:

Interest: The amount of money you pay to borrow money or the amount of money you
earn on a deposit.

Annual Interest Rate: The percent of interest that you pay for money borrowed or
earn for money deposit.

Simple Interest: is calculated on the principal or original amount of the loan.

Compound Interest: Interest that is earned on both the principal and any previously
earned interest.

Maturity Value: The sum of the principal amount and the interest payments.
 ATENEO DE DAVAO UNIVERSITY
Km. 7 Central Park Blvd, Talomo, 8016 Davao City, Philippines
Tel No. +63 (82) 221.2411 local 6200
E-Mail: shs@addu.edu.ph * www.addu.edu.ph

In Consortium with Ateneo de Zamboanga University and Xavier University

SENIOR HIGH SCHOOL – GENERAL MATHEMATICS

Lesson Proper (Experience)

1(a). Annual Simple Interest

The Simple Interest (𝐼𝑠 ), is calculated on the principal or original amount of

the loan.

𝐼𝑠 = 𝑃𝑟𝑡
Where:
P – Principal
r – Rate
t – term or time in years

Using the data in the Learning Content, solve the problem, and the interest will be computed
as shown.

Example 1. Assume Php260,000 is invested for five years at a simple interest rate of 10%.
Calculate the total amount and interest payable, at the end of the five-year period.

Given:
P = $ 260,000
r = 10% = 0.10
t = 5 years

Solution:
Is = Prt
= (260,000)(0.10)(5 years)
Is = Php 130,000

1(b). Maturity Value in a Simple Interest

The future value 𝐹 is given by the formula:

𝐹 = 𝑃 + 𝐼𝑠
𝐹 = 𝑃 + 𝑃𝑟𝑡
 ATENEO DE DAVAO UNIVERSITY
Km. 7 Central Park Blvd, Talomo, 8016 Davao City, Philippines
Tel No. +63 (82) 221.2411 local 6200
E-Mail: shs@addu.edu.ph * www.addu.edu.ph

In Consortium with Ateneo de Zamboanga University and Xavier University

SENIOR HIGH SCHOOL – GENERAL MATHEMATICS

𝐹 = 𝑃 (1 + 𝑟𝑡)

Where: P is the principal, r is the annual rate, and t is the term or time in years.
Using the problem in the Learning Content, the interest will be computed as shown.

P = $ 260,000 r = 10% = .10 t = 5 years

Solution:
F = P(1+rt)
= (260,000)(1+(0.10)(5 years))
F = $ 390,000

Example 2. Assume that $ 260,000 is invested for five years at a rate of 8.5% compounded
annually. Calculate the total amount and interest at the end of five years.

Note: Allow the learners to analyze examples 1 and 2.

2. Maturity Value in a Compound Interest

The future value 𝐹 is given by the formula:

𝑟 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚

Where:
P is the principal
r is the annual rate
m is the number of times the amount is compounded annually; and
t is the term or time in years.

Annually: m= 1 (once a year)

Semi-annually: m= 2 (2 times a year)
Monthly: m= 12 (12 times a year)
Quarterly: m= 4 (4 times a year)

Use the formula to find the future value of the compound interest problem in example 2.

Given: P = $ 350 r = 10% = 0.05 m=1 t = 5 years

𝑟 𝑚𝑡 0.085 (1)(5)
𝐹 = 𝑃(1 + ) = $ 260,000 (1 + )
𝑚 1
 ATENEO DE DAVAO UNIVERSITY
Km. 7 Central Park Blvd, Talomo, 8016 Davao City, Philippines
Tel No. +63 (82) 221.2411 local 6200
E-Mail: shs@addu.edu.ph * www.addu.edu.ph

In Consortium with Ateneo de Zamboanga University and Xavier University

SENIOR HIGH SCHOOL – GENERAL MATHEMATICS

= F = Php 390,950.74

𝐼𝑐 = 𝐹 − 𝑃 = 390,950.74 – 260,000 = Php130,950.74

Additional examples including explanations.

Give it a Go!
Instructions: Solve the following questions and apply the appropriate formula.

You want to save for a down payment on a house. You decided to invest 8000 pesos in a
mutual fund that offers an annual interest rate of 8%, compounded semi-annually. You plan to
leave the money invested for 5years. What will be the total amount in your account at the end
of 5years?
Given: 0.08 (2)(5)
P = Php 8,000 𝐹 = 8,000(1 + )
2
r = 8% = 0.08 𝐹 = 𝑃ℎ𝑝𝟏𝟏, 𝟖𝟒𝟏. 𝟗𝟓
m=2 𝐼𝑐 = 𝐹 − 𝑃= 𝟏𝟏, 𝟖𝟒𝟏. 𝟗𝟓 − 8,000
t = 5 years
𝐼𝑐 = 𝑃ℎ𝑝 3, 𝟖𝟒𝟏. 𝟗𝟓

Example 4. After 50 years of 4.8% interest compounded monthly, an account has

Php30,508.88. What was the original deposit amount?
𝑟 𝑚𝑡
𝐹 = 𝑃(1 + )
Given: 𝑚
F = Php 30,508.88 0.048 12(50)
30,508.88 = 𝑃(1 + )
r = 4.8% = 0.048 12
m = 12 (monthly) 0.048
30,508.88 𝑃(1 + 12 )12(50)
t = 50 years =
0.048 12(50) 0.048
(1 + 12 ) (1 + 12 )12(50)
30,508.88
=𝑃
0.048
(1 + 12 )12(50)
𝑃 = 𝑃ℎ𝑝 2,780.98
 ATENEO DE DAVAO UNIVERSITY
Km. 7 Central Park Blvd, Talomo, 8016 Davao City, Philippines
Tel No. +63 (82) 221.2411 local 6200
E-Mail: shs@addu.edu.ph * www.addu.edu.ph

In Consortium with Ateneo de Zamboanga University and Xavier University

SENIOR HIGH SCHOOL – GENERAL MATHEMATICS

Seatwork:
1.) Complete the table underneath.
P r t I F
Php 500 8% 8 (1) (2)
Php 1,000 (3) 4 (4) Php 1,240
(5) 5% 2 (6) Php 880
Php 2,500 2.5% (7) (8) Php 3,200

2. Emily wants to save up for a dream vacation to a tropical island. She decided to invest her
savings in a high-yield savings account that offers a compound interest rate of 6%
semiannually. She initially invested Php5,000 in the account. After a certain period, Emily
checks her account balance and finds out that it has grown to Php6,500. Can you help Emily
figure out how long she had her money invested in the saving account?

Given: 𝑟
𝐹 = 𝑃(1 + )𝑚𝑡
F = Php6,500 𝑚 0.06 2(𝑡)
6,500 = 5,000(1 + )
P = Php5,000 2
r = 6% = 0.06 6,500 5,000(1 + 0.03)(2𝑡)
=
m = 2 (semi-annually) 5,000 5,000
6,500
= (1.03)2𝑡
5,000
1.3 = (1.03)2𝑡
To isolate t, convert to logarithm

2𝑡 = log1.03(1.3)
2𝑡 log1.03(1.3)
=
2 2

𝑡 ≈ 4.44
Reflection
1. Which 6c is relevant to the present theme?
2. How might you utilize what you are presently figuring out how to arrive at your
monetary objectives?
3. How might you at any point manage that information?