Republic of the Philippines

11
Department of Education
Region v
SCHOOLS DIVISION OF SORSOGON
GUBAT NATIONAL HIGH SCHOOL

BUSINESS MATHEMATICS
Learning Activity Sheet No. 6
INTERESTS
Student’s Name: ___________________________________________ Grade and Section: _____________________
Date Received: _________________________ Date Submitted: ________________________
I. INTRODUCTORY CONCEPT:
This learning activity sheet will explain how interest is applied on either investment or obligation. This packet
also includes analyzing and solving various problems which involve concepts of interests and how it is applied in
buying and selling of products. As you go through, a scientific calculator is essential for significant computations.
Let’s begin.
II. LEARNING SKILLS FROM MELCs:
After going through the learning activity sheet, you are expected to compute interest specifically as applied to
mortgage, amortization, and on services/utilities and on deposits and loans.
III. ACTIVITIES:
A. Let us Review
Interest
If you borrow money from someone or from a bank, you are expected to pay for the use of money. The
payment for the use of money is called interest. The three factors to determine how much interest is charged
for a loan are principal (the sum borrowed), interest rate (percent of the principal to be paid each unit of
time) and time or terms (is the period within which the money borrowed is repaid and expressed in year/s).
Basic Formula: 𝑰 = 𝑷𝒓𝒕, where 𝑰 is interest, 𝑷 is Principal, 𝒓 is interest rate, 𝒕 is time/term
To determine the final amount or maturity value at the end of term, simply add the principal and interest:
𝑭 = 𝑷 + 𝑰, where 𝑭 is Final Amount, 𝑷 is principal, I is interest.
Since 𝑰 = 𝑷𝒓𝒕, F can be expressed as 𝑭 = 𝑷 + 𝑷𝒓𝒕 𝑜𝑟 𝑭 = 𝑷 (𝟏 + 𝒓𝒕)
B. Let Us Study
Lesson 1:
Simple and Compound Interest on Deposit and Loan
Example 1 (Simple Interest on Deposits)
You deposited ₱ 500,000.00 in a bank that offers 6% per annum interest. If you intend to withdraw the
money after 8 years. How much interest will you earn after 8 years? How much is the final amount?
Solution
Given: P = ₱ 500,000
r = 6%
t = 8 years
I =?
𝐼 = 𝑃𝑟𝑡
= (₱ 500,000) (0.06) (8)
= ₱ 240,000
At the end of 8 years, you would have earned an interest of ₱ 240,000.00. Add it to your deposit, you
would have ₱ 740,000.00 in your bank account.
Example 2 (Simple Interest on Loans)
Masha borrowed ₱950,000 from a bank. The bank charges 12% simple interest per year. How much is the
maturity value of the loan after 3 years?
Solution:
Given: P = P950,000
R = 12%
T = 3 years
𝐼 = 𝑃𝑟𝑡
= (₱ 950,000) (0.12) (3)
= ₱ 342,000
After 3 years, Masha must pay ₱ 342,000 interest. Add it to her loan, she will have to pay ₱ 1,292,000
worth of money.
1
 Compound Interest
It is the interest on the first compounding period is added on the principal, which will then be the basis
for the interest to be computed for the next period.
It is important that you get familiar with compounding frequency. You will use m to denote the
compounding frequency. See the table provided on the next page.
Compounding Frequency Value of m
Annually 1
Semi-annually 2
Quarterly 4
Monthly 12
Bi-monthly 24
Weekly 52
Daily 365
You will use this formula in order to compute for compound interest.
𝑟 𝑡𝑚
𝐼 = [𝑃(1 + ) ]−𝑃
𝑚
where: 𝑷 is the Principal
𝒓 is the interest rate
𝒎 is the number of times interest applied per time period
𝒕 is the number of time periods elapsed
Example 3 (Compound Interest on Deposits)
Suppose you decided to deposit ₱480,000 in another bank that offers 6% compounded semi-annually. How
much interest would you earn after 5 years?
Solution:
Given: P = ₱480,000
r = 6%
t = 5 years
m = 2 (semi-annually)
0.06 (5)(2)
𝐼 = [₱480,000(1 + ) ]− ₱480,000
2
10
𝐼 = [₱480,000(1 + 0.03) ] − ₱480,000
𝐼 = [₱480,000(1.03)10 ] − ₱480,000
𝐼 = [₱480,000(1.343916379)] − ₱480,000
𝐼 = ₱645,079.86 − ₱480,000
𝐼 = ₱165,079.86
After 5 years, you would have earned P165,079.86 interest in a bank that offers semi-annual compound
interest.
Utilities and Services – these are products/schemes that make business transactions easy and
comfortable. However, a certain amount must be paid in exchange for the services offered.
Example 4
Pure Waters is the only distributor of potable water in the locality. Your family received ₱678.40 water bill
for May with due date on June 5. A 10% penalty is charged for delayed payment. If you pay 3 days after the due
date, how much is the penalty? How much is your total expenditure on water consumption for the month?
Solution:
Penalty = (₱678.40) (0.10)
= ₱67.84
Total expenditure = ₱678.40 + ₱67.84
= ₱746.24
Lesson 2:
Mortgages
A mortgage loan uses property as collateral. The lender usually requires a down payment for the loan. The
down payment represents a certain percentage of the purchase price of the property.
Example 1
Assume that you wish to purchase a second-hand motor bike worth ₱44,000 and the seller requires 20%
down payment. How much would your initial cash out be? Find the amount of the mortgage.
Solution:
Remember that down payment is a percentage of the purchase price. To compute for the down payment:

Down payment = (Purchase price) (Down payment rate)

= (₱44,000.00) (20%)
= ₱8,800.00
2
 The amount of the mortgage loan is the balance after paying the down payment:
Mortgage loan = Purchase price - Down payment
= ₱44,000.00 - ₱8,800.00
= ₱35,200.00
Example 2
Mr. Guevarra decided to borrow ₱1,500,000 to buy a residential lot. The effective rate of interest is 7.5%.
The loan must be paid in full in one year. How much must Mr. Guevarra pay after one year? How much interest
is paid by Mr. Guevarra after one year?
Note: SINGLE PAYMENT COMPOUND INTEREST
Formula: 𝑭 = 𝑷 (𝟏 + 𝒊)𝒏
Where: P is the principal
i is the interest rate
n is the total number of payments
The name refers to the idea that a single payment is due at the end of the loan and that payment includes
all of the compounded interest. A clear application of this formula is when some amount of money is put into a
bank account at a fixed interest rate for some period of time. This formula can be used to calculate how much
money will be in the account at the end of that time.
Solution:
Given:
P (loan’s initial amount) = ₱1,500,000
i (interest rate) = 7.5%
n (total number of payments) = 1
Find: F (total amount due after maturity) = ?
I (total amount of interest paid) = ?
F = P (1 + i)n
= ₱1,500,000 (1 + 7.5%)1
= ₱1,500,000 (1 + .075)1
= ₱1,500,000 (1.075)
= ₱1,612,500

The amount P1,612,500 must be paid by Mr. Guevarra after one year.
To compute for interest, we simply deduct the loan’s initial amount from the maturity value.
𝐼=𝐹−𝑃
𝐼 = ₱1,612,500.00 - ₱1,500,000.00
𝐼 = ₱112,500.00
Lesson 3:
Interest and Amortization
A loan is amortized if both the principal and interest are paid by a sequence of equal periodic payments. If
there were no interest rate, determining your periodic payment would be simple. A bank, however, will collect
interest in order to make money. The series of payments made until the end of the loan term is your amortization.
Example 1 (Amortization on Loans)
Suppose you obtain ₱350,000.00 loan payable in 3 years. The bank charged you 5% interest annually.
However, payments must be made monthly. Determine your monthly amortization.
Solution:
Before you proceed to the computation, it is important that you understand annual percentage rate or
APR. The 5% is APR. Since you will make monthly payments, you must convert the 5% APR into a monthly rate.
You must divide 5% by 12 to get 0.416%. Your monthly rate is 0.416%. To determine the monthly payment,
use the following formula:
𝑖𝑃(1+𝑖)𝑛
𝐴=
(1+𝑖)𝑛 −1
where A is the monthly payment
P is the loan’s initial amount
i is the monthly interest rate; and
n is the total number of payments
Going back to our example:
[(0.416%)(₱350,000.00)](1+0.416%)(12)(3)
𝐴= (1+0.416%)(12)(3) −1
[(0.00416)(₱350,000.00)](1+0.00416)36
𝐴= (1+0.00416)36 −1
(₱1456.00)(1.161194667)
𝐴= 0.161194667
𝑨 = ₱𝟏𝟎, 𝟒𝟖𝟖. 𝟓𝟔
3
 Lesson 4:
Amortization Schedule
An amortization schedule is a table which shows the division of each payment into principal and interest,
together with the outstanding loan balance after each payment is made. This part of the module will help you
construct an amortization schedule using two repayment programs namely:
1. Equal Principal Payments- under this arrangement, the loan is repaid in equal amounts of principal. The
installments are unequal, however, because the interest payment is largest in the first year and becomes
smaller as the principal is gradually paid.
2. Equal Amortization- the loan is repaid in equal installments. The amount applied to principal is smallest in
the first year, then the same payments to principal gradually increases through the payment years, the largest
of which is made on the last year. The decreasing payments on interests, however, equalizes the uneven
payments on principal.
Example 1 (Equal Principal Payments)
Assume a ₱120,000 loan payable in 12 years at 8% annual interest. Construct an amortization schedule
using the equal principal payments program.
Solution:
The amortization schedule will be constructed using the following steps:
Step 1. Determine the amount of principal repaid each period by dividing the principal by the number of
payments
For the above example, it would equal to ₱120,000 ÷ 12 years = ₱10,000.
Step 2. Multiply the periodic interest rate by the outstanding balance at the beginning of year to determine how
much of this payment will go toward interest.
For the first row, ₱120,000 x 8% = ₱9,600
Step 3. Add the principal portion to the interest portion to determine the total payment for the period.
For the first row, ₱10,000 + ₱9,600 = ₱19,600
Step 4. Go to the next row and repeat only steps 2 through 4.
Below is the illustration of the equal principal payment scheme above.
Outstanding
Repayment of principal Interest due at Total payment
Year principal at
at end of year end of year at end of year
beginning of year
1 ₱120,000.00 ₱10,000.00 ₱9,600.00 ₱19,600.00
2 110,000 10,000.00 8,800 18,800
3 100,000 10,000.00 8,000 18,000
4 90,000 10,000.00 7,200 17,200
5 80,000 10,000.00 6,400 16,400
6 70,000 10,000.00 5,600 15,600
7 60,000 10,000.00 4,800 14,800
8 50,000 10,000.00 4,000 14,000
9 40,000 10,000.00 3,200 13,200
10 30,000 10,000.00 2,400 12,400
11 20,000 10,000.00 1,600 11,600
12 10,000 10,000.00 800 10,800

Example 2 (Equal Amortization Payments)

Assume a ₱120,000 loan payable in 1 year at 8% annual interest compounded monthly. Construct an
amortization schedule using the equal amortization payments program.

Solution:
The amortization schedule will be constructed using the following steps:
Step 1. Determine the amount of amortization payment for each period using this formula:

𝑖𝑃(1+𝑖)𝑛 8%
𝐴= ;𝑖= = 0.667%
(1+𝑖)𝑛 −1 12
[(0.667%)(₱120,000.00)](1+0.667%)(12)(1)
𝐴 =
(1+0.667%)(12)(1) −1
[(0.00667)(₱120,000.00)](1+0.00667)12
𝐴=
(1+0.00667)12 −1
(₱800.40)(1.083042541)
𝐴=
0.083042541
𝑨 = ₱𝟏𝟎, 𝟒𝟑𝟖. 𝟖𝟑
For the above example, the monthly amortization is equal to ₱10,438.83. The outstanding balance at
the beginning of the month shall decrease by ₱10,438.83.

4
Step 2. Multiply the periodic interest rate by the outstanding balance at the beginning of month
to determine how much of this payment will go toward interest.
For the first row, ₱120,000 x 0.00667 = P800.40
Step 3. Subtract the interest portion from the total payment at the end of the month to
determine the amount of principal paid for the period.
For the first row, ₱10,438.83 – ₱800.40 = ₱9,638.43
Step 4. Go to the next row and repeat only steps 2 through 4.

Below is the illustration of the equal amortization payment scheme above.

Month Outstanding principal Repayment of principal Interest due at Total payment at
at beginning of the at end of the month end of the month end of the month
month
1st ₱120,000.00 ₱9,638.43 ₱800.40 ₱10,438.83
2nd 109,561.17 9,708.05 730.77 10,438.83
3rd 99,122.34 9,777.68 661.15 10,438.83
4th 88,683.51 9,847.31 591.52 10,438.83
5 th 78,244.68 9,916.94 521.89 10,438.83
6th 67,805.85 9,986.56 452.27 10,438.83
7th 57,367.02 10,056.19 382.64 10,438.83
8th 46,928.19 10,125.82 313.01 10,438.83
9th 36,489.36 10,195.45 243.38 10,438.83
10th 26,050.53 10,265.07 173.76 10,438.83
11 th 15,611.70 10,334.70 104.13 10,438.83
12th 5,172.87 10,404.37 34.50 10,438.83
C. Let Us Practice
TASK 1:
Directions: Complete the table below. Show your solutions on a separate sheet. Each item is given 2 points.
𝑵𝒐. 𝑷 𝒓 (𝒑𝒆𝒓 𝒚𝒆𝒂𝒓𝒔) 𝒕 𝑰 𝐹
1. 𝑃ℎ𝑝 150,000 5% 8 𝑦𝑒𝑎𝑟𝑠
2. 12.4% 3 𝑦𝑟𝑠 𝑃ℎ𝑝 3,220
3. 𝑃ℎ𝑝 80,000 3% 𝑃81,000
TASK 2:
Directions: Solve each of the following problems. Write your solution and answer on a separate sheet. Each
item is given 3 points.
1. Mr. Gatu was granted a car loan by XYZ Bank worth 1M payable in 5 years at 12% per year. Compute for
Mr. Gatu's monthly amortization.
2. Rachel wants to use her credit card to buy P20,000.00 worth of smartphone payable in 5 months at 18%
interest per year. Compute for the monthly amortization of Rachel.
3. Cardo wants to compare the simple interest to compound interest on a P150,000.00 investment.
a. Find the simple interest if funds earn 8% simple interest in 8years.
b. Find the interest if funds earn 8% compounded annually in 8 years.
c. Find the interest if funds earn 8% compounded semi-annually in 8 years.
d. Find the interest if funds earn 8% compounded quarterly in 8 years.
e. What will you choose for your investment? Why?
4. A ₱7,800,500 loan was granted to Hyae Photography. The loan carries 9% annual interest compounded
quarterly for 3 years. Prepare an amortization schedule using the equal amortization payment program.
Use the table below as your guide.

Outstanding principal Repayment of Interest due at Total payment

Instalment
at beginning of the principal at end of end of the at end of the
Period
period the period period period
1st ₱7,800,500.00 ₱ ₱ ₱
2nd
3rd
4th
5th
6th
7th

5
 8th
9th
10th
11th
12th

Evaluation:
Directions: Answer the following problems and show your complete solution on a separate sheet.

𝑵𝒐. 𝑷 𝒓 (𝒑𝒆𝒓 𝒚𝒆𝒂𝒓𝒔) 𝒕 𝑰 𝐹

1. 1
𝑃ℎ𝑝 3,300 8 % 9 𝑚𝑜𝑛𝑡ℎ𝑠
2
2. 1
12.5% 5 𝑦𝑟𝑠 𝑃ℎ𝑝 55,000
2
3. 𝑃ℎ𝑝 16,000 6% 𝑃16,960
4. Alyana aims to accumulate 2 million pesos in 10 years. Which investment will require the smallest
present value?
a. 5% simple interest
b. 5% compounded annually
c. 5% compounded semi-annually
d. 5% compounded quarterly
e. Which investment will require the smallest present value?
5. What is the amortization payment for a P500,000.00 loan which carries 12% annual interest compounded
monthly for 3 years?
6. A P30,000.00 loan was granted to a janitor carrying 6% interest compounded monthly payable in a year.
Prepare for him an amortization schedule using the equal principal payments scheme. Use the table below
as you guide.
Outstanding principal at Repayment of principal Interest due at Total payment at
Month
beginning of the month at end of the month end of the month end of the month
1 P30,000.00 P P P
2
3
4
5
6
7
8
9
10
11
12

D. ANSWER KEY
5. Php 19, 871.79 5. E. answers may vary
3. 1 year and 960.00 D. Php 132, 681.09 3. 0.42years or 5 months and Php 1,000.00
1. Php 210.3750 and Php 3,510.3750 C. Php 130, 947.19 1. Php 60,000.00 and Php 210,000.00
EVALUATION: B. Php 127, 639.53 TASK 1:
A. Php 96,000.00 3.
Php 22,244.55 1.
TASK 2:

E. REFERENCES
• Teaching Guide for Senior High School: Business Mathematics. Quezon City: CHED.
• Learning Activity Sheet in Business Mathematics in Context Grade 11. DepEd Regional Office No. 02 (Cagayan Valley).
• Lopez, B.R., Lundag, L. Dagal, K.A. & Garces, I.J. (2016). Business Math Textbook.Quezon City: Vibal Group, Inc. pp.53-69

Prepared by: Reviewed by:

CHAD LOWE V. VILLARROYA JOAN E. HAPA

SHS Teacher 3 Subject Group Head