Lesson 2

Solving Problems
Involving Simple
Interest
 Objectives

At the end of this lesson, the learner should be able to

● correctly compute for simple interest, maturity

value, future value, and present value in simple
interest; and

● correctly solve problems involving simple interest.

 Essential Questions

● How can you compute for simple interest, maturity value,

future value, and present value in simple interest?

● How can you solve word problems involving simple

interest?
 Warm Up!

Before we discuss more problems involving simple interest,

let us review the concept of simple interest applied to a loan
by watching a video online.

Brad Carey. “Simple Interest.” YouTube video, 2:27. Posted

April 2016. https://www.youtube.com/watch?v=XSGdzJSO3sQ
 Guide Questions

● What is an interest?

● How do we compute for the interest and the total amount

to be paid in the loan?

● Is it wiser to make a loan to buy a car than saving first

before buying the car?
Learn about It!

Simple Interest
1 refers to an interest computed on the original principal during the whole period
or time of borrowing
Learn about It!

 
Formula for Simple Interest
2 The formula for the simple interest is
 

 
where is the interest amount, is the principal, is the simple interest rate, and is
the time written in years.
Learn about It!

3 Formula for Principal, Rate of Interest, and Time

If the principal, rate of interest, or the time is unknown in a given problem, we can
use the following triangle as a guide for the formula
 Learn about It!

a. If the principal value (also known as the present

 

value) is unknown, the formula will be

b. If the rate of interest is unknown, the formula

will be

c. If the time (also known as the term of interest) is

unknown, the formula will be
Learn about It!

Maturity Value or Future Value

4 refers to the sum of the principal and interest; sometimes called the future value
of the principal amount
Learn about It!

 
Formula for Maturity Value
5 The formula for the maturity value is
 

 
Since , we have
 Try It!

Example 1: If you invested ₱50 000 in a bank that earns 2%

simple interest, how much will you earn in 2 years and 6
months?
 Try It!
 Example 1: If you invested ₱50 000 in a bank that earns 2% simple interest, how much will
you earn in 2 years and 6 months?

Solution:
1. Identify the given from the problem.

Principal
Rate of Interest
Time 2 years and 6 months years
 Try It!
 Example 1: If you invested ₱50 000 in a bank that earns 2% simple interest, how much will
you earn in 2 years and 6 months?

Solution:
2. Write the formula to be used.

Since the problem is asking for the earnings, we are

looking for the amount of interest . The formula that will
be used is
 
 Try It!
 Example 1: If you invested ₱50 000 in a bank that earns 2% simple interest, how much will
you earn in 2 years and 6 months?

Solution:
3. Substitute the given values to the formula and solve.
 
 Try It!
 Example 1: If you invested ₱50 000 in a bank that earns 2% simple interest, how much will
you earn in 2 years and 6 months?

Solution:
3. Substitute the given values to the formula and solve.
 

Thus, you will earn ₱2 500 in 2 years and 6 months.

 Try It!

Example 2: How much did Rowell borrow if, after 4 years and
9 months, he paid a 5% simple interest of ₱4 788?
 Try It!
 Example 2: How much did Rowell borrow if, after 4 years and 9 months, he paid a 5%
simple interest of ₱4 788?

Solution:
1. Identify the given from the problem.

Time 4 years and 9 months

Rate of Interest
Amount of Interest
 Try It!
 Example 2: How much did Rowell borrow if, after 4 years and 9 months, he paid a 5%
simple interest of ₱4 788?

Solution:
2. Write the formula to be used.

Since we are solving for the borrowed amount, we are

looking for the principal . The formula that will be used is
 Try It!
 Example 2: How much did Rowell borrow if, after 4 years and 9 months, he paid a 5%
simple interest of ₱4 788?

Solution:
3. Substitute the given values.
 Try It!
 Example 2: How much did Rowell borrow if, after 4 years and 9 months, he paid a 5%
simple interest of ₱4 788?

Solution:
3. Substitute the given values.

Thus, the borrowed amount is ₱20 160.

 Let’s Practice!

Individual Practice:

1. Vivian borrowed an amount of ₱45 000 from a lending

institution to finance her small business. If the loan is to be
paid in 30 months at a simple interest rate of 7.25%, how
much will Vivian pay?
2. Dennis promised to pay an interest amounting to ₱487.50
on a loan that earns an interest rate of 3.25% payable in 6
months. How much was the loaned amount?
 Let’s Practice!

Group Practice: To be done in groups with 4 members each

Everett needs money as a capital for his new business. He

has two options where he can loan the money. If he borrows
₱100 000 from a bank, he will then have to pay the bank ₱116
000 payable in two years. However, if he borrows
₱50 000 from a loan shark, he will pay ₱60 000 in return for
the same amount of time. From which of the two should
Everett borrow the money?
Key Points

Simple Interest
1 refers to an interest computed on the original principal during the whole period
or time of borrowing

2 Formula for Simple Interest

The formula for the simple interest is
 

 
where is the interest amount, is the principal, is the simple interest rate, and is
the time written in years.
Key Points

3 Formula for Principal, Rate of Interest, and Time

If the principal value (also known as the present value) is unknown, the formula
will be

 
If the rate of interest is unknown, the formula will be
 

 
If the time (also known as the term of interest) is unknown, the formula will be
Key Points

Maturity Value or Future Value

4 refers to the sum of the principal and interest; sometimes called the future value
of the principal amount

5 Formula for Maturity Value

The formula for the maturity value is
 

 
Since , we have
 Synthesis

● How do you solve problems involving simple interest?

● In what other ways can you apply the concept of simple

interest?

● Is it possible that interests are computed more than once

a year?