SIMPLE

INTEREST
 INTRODUCTION
O In business, capital is very
important. However, not all
business owners always have
enough capital to sustain their
business. They have to borrow
money for use in the business.
Borrowers need to pay interest on
the money that they borrow.
 Terms:
OPrincipal – the amount
borrowed
ORate – the cost of using money
expressed as a percentage of
the principal
OTime – the term of period of
the loan
Basic Formula for Simple Interest

I = Prt
 I = Prt
OI – interest
OP – principal
Or – rate
Ot - time
Basic Formula for Maturity Value

F=P+I
F = P(1 + rt)
Examples:
1. Tessa borrowed
P2,000.00 at 12% interest
for 2 years. Find the
interest and the maturity
value.
Given:
P = 2,000.00
r = 12%
t = 2 years
Solutions:
a. Interest
I = Prt
= 2,000 x 12%/yr x 2 years
= 2,000 x 24%
= 480
Solutions:
b. Maturity Value
F=P+I
= 2,000 + 480
= 2,480
Solutions:
a. Maturity value
F = P(1 + rt)
= 2,000 [1 + (0.12)(2)]
= 2,000 (1 + 0.24)
= 2,000 (1.24)
= 2,480
Solutions:
b. Interest
I=F–P
= 2,480 – 2,000
= 480
Exercises:
2. Eunice lent P3,000.00 at
14% for 6 months. How much
will she get at the end of the
term? How much interest did
she earn?
Given:
P = 3,000.00
r = 14%
t = 6 months
Solutions:
a. Maturity value
F = P(1 + rt)
= 3,000 [1 + (0.14)(6/12)]
= 3,000 [1 + (0.14)(0.5)]
= 3,000 (1.07)
= 3,210
Solutions:
b. Interest
I=F–P
= 3,210 – 3,000
= 210
Exercises:
3. Nora invested P1,800.00 for
9 months at 1% per month.
How much will she get upon
maturity? How much interest
did she earn?
Given:
P = 1,000.00
r = 1% per month
t = 9 months
Solutions:
a. Maturity value
F = P(1 + rt)
= 1,800 [1 + (1%)(9)]
= 1,800 [1 + (0.01)(9)]
= 1,800 (1.09)
= 1,962
Solutions:
b. Interest
I=F–P
= 1,962 – 1,800
= 162
Exercises:
4. Connie lent 600.00 to
Yoly at 1% per month
for 2 years.
Given:
P = 600.00
r = 1% per month
t = 2 years
Solutions:
a. Maturity value
F = P(1 + rt)
= 600 [1 + (1%)(24)]
= 600 [1 + (0.01)(24)]
= 600 (1.24)
= 744
Solutions:
b. Interest
I=F–P
= 744 - 600
= 144
Exercises:
5. Accumulate P1,200.00
for 2 years at 3% per
quarter simple interest.
Given:
P = 1,200.00
r = 3% per quarter
t = 2 years
Solutions:
a. Maturity value
F = P(1 + rt)
= 1,200 [1 + (3%)(8)]
= 1,200 [1 + (0.03)(8)]
= 1,200 (1.24)
= 1,488
Solutions:
b. Interest
I=F–P
= 1,488 – 1,200
= 288
MORTGAGES
 Introduction
O It is when you use your property
as collateral for a loan from a
financial institution. For most
installment purchases, a down
payment is generally required. It is
usually a certain percent of the
purchase price.
 Example
OAssume that you wish to
purchase a secondhand car
worth P312,500.00 and the
seller requires a 20% down
payment.
 Downpayment

= Purchase price x %
= 312,500 x 20%
= 62,500
 Mortgage loan
= Purchase Price – D.Payment
= 312,500 – 62,500
= 250,000
 Amortization

- The installment payment

of the loan
 Formula of Amortization
O 
  
A = monthly payment
P = loan’s initial amount
i = monthly interest rate
N = total number of
payments
 Amortization schedule
- it is a table or chart showing each
monthly payment on an amortizing
loan indicating how much of each
payment goes to interest and how
much goes to principal
 COMMISSIONS
AND OVERRIDES
 INTRODUCTION
O Salesmen, agents, and brokers are
generally paid commissions as
incentives for increasing a firm’s
sales. Salesmen are employees of
the firm either paid on a straight
commission basis or on a salary
plus commission basis.
 Plain Commission
OMost sales agents earn
commissions only. They are
not paid any salary. Therefore,
they exert their best effort to
increase their sales because the
more they sell, the more they
earn.
 Examples:
O Carmen Yambao is a sales agent
for the High Ace Realty. She is
paid based on commission only.
She is given a 2% commission on
her sales. For the current month,
her sales was P1,035,000.00 Her
commission would be?
 Examples:
O Jed Montenegro is a car sales
agent. He is paid commission only
at the rate of 2.5%. For the current
month, he sold two cars totaling
P1,875,000.00 His commission
would be?
 Commission and Salary
OGenerally, if a person is
employed by a firm as a
salesman, he or she is given a
basic salary in addition to the
commission he or she is given
on his or her sales
 Gross Earnings =
Basic Salary +
Commission +
Overrides + Allowances