BASIC

BUSINESS
mathematics
GENERAL
MATHEMATICS

QUARTER 2
SIMPLE INTEREST

GENERAL MATHEMATICS 2
 Objectives:
At the end of the lesson,
you should be able to:
 define terms related to simple
interest;
 compute interest, maturity
value or future value, and
present value in simple
interest and;
This Photo by Unknown Author is licensed under CC BY
GENERAL MATHEMATICS
 solve problems involving 3

simple interest.
DEFINITION OF TERMS:

Lender or Creditor
person (or institution)
who invests the
money or makes the
funds available This Photo by Unknown Author is licensed under CC BY-SA

GENERAL MATHEMATICS 4
DEFINITION OF TERMS:

Borrower or Debtor
person (or institution)
who owes the money
or avails of the funds
from the lender This Photo by Unknown Author is licensed under CC BY

GENERAL MATHEMATICS 5
DEFINITION OF TERMS:

Origin or loan date

date on which
money is received
by the borrower
This Photo by Unknown Author is licensed under CC BY

GENERAL MATHEMATICS 6
DEFINITION OF TERMS:

Repayment date or
maturity date
date on which the
money borrowed,
or loan is to be This Photo by Unknown Author is licensed under CC BY-NC

completely repaid
GENERAL MATHEMATICS 7
DEFINITION OF TERMS:

Time or term (t)

amount of time in years
the money is borrowed
or invested; length of
time between the origin
and maturity dates
This Photo by Unknown Author is licensed under CC BY-SA

GENERAL MATHEMATICS 8
DEFINITION OF TERMS:

Principal or Face
Value or Present
Value (P)
amount of money
borrowed or invested This Photo by Unknown Author is licensed under CC BY-SA

on the origin date

GENERAL MATHEMATICS 9
DEFINITION OF TERMS:

Rate (r)
annual rate, usually in
percent, charged by
the lender, or rate of
increase of the This Photo by Unknown Author is licensed under CC BY-NC

investment
GENERAL MATHEMATICS 10
DEFINITION OF TERMS:

Interest (I)
amount paid or
earned for the use
of money
This Photo by Unknown Author is licensed under CC BY-NC

GENERAL MATHEMATICS 11
DEFINITION OF TERMS:

Simple Interest (Is)

interest that is
computed on the
principal and then
added to it.
GENERAL MATHEMATICS 12
DEFINITION OF TERMS:

Final Amount or
Maturity Value or
Future Value (F)
amount after t years, that
the lender receives from
the borrower on the
This Photo by Unknown Author is licensed under CC BY

maturity date.
GENERAL MATHEMATICS 13
 FORMULAS:

Is
P r t Is = Prt
GENERAL MATHEMATICS 14
 FORMULAS:

Is
P r t
P=
GENERAL MATHEMATICS 15
 FORMULAS:

Is
P r t
r=
GENERAL MATHEMATICS 16
 FORMULAS:

Is
P r t
t=
GENERAL MATHEMATICS 17
 FORMULAS:

F = P + Is
F = P + Prt
GENERAL MATHEMATICS
F = P(1 + rt) 18
 FORMULAS:
F = P(1 + rt)
P=
GENERAL MATHEMATICS

P = F(1 + rt) -1 19
 ILLUSTRATIVE EXAMPLES:

1. Complete the table below by finding the

unknown.
Principal (P) Rate (r) Time (t) Interest
(Is)
(a) 2.5% 4 years Php 1 500
Php 36 000 (b) 1.5 years Php 4 860
Php 250 000 0.5% (c) Php 275
20

Php 500 000 12.5% 10 years (d)

 ILLUSTRATIVE EXAMPLES:

2. How much interest is

charged when Php 50 000 is
borrowed for 9 months at an
annual simple interest rate of
10%? 21
 ILLUSTRATIVE EXAMPLES:

3. A working student in one of the biggest fast-food

restaurants in Lucena City wants to save for the
upcoming school year. He wants to deposit his
money into a Filipino owned bank so that even in a
simple way he can help his fellow Filipino. Supposed
his monthly salary is ₱10,000.00 and it was deposited
to an account that earns a simple interest of 2.75%
per annum. Find the simple interest after 6 months,
22

one year and 18 months

 ILLUSTRATIVE EXAMPLES:

4. When invested at an annual

interest rate of 7%, an amount
earned Php 11 200 of simple
interest in two years. How much
money was originally invested?
23
 ILLUSTRATIVE EXAMPLES:

5. If an entrepreneur applies for a

loan amounting to Php 500 000 in a
bank, the simple interest of which
is Php 157 500 for 3 years, what
interest rate is being charged?
24
 ILLUSTRATIVE EXAMPLES:

6. Due to COVID-19 pandemic Miss Dada a female

resident of Brgy. May Pagkaisa somewhere in Quezon
Province thinks of a business that can provide for her
needs as well as the need of her neighbor so she can be
of help even in this trying time.
Since she doesn’t have money on hand, she decide to
borrow from a bank as the start-up capital of ₱50,000.00
at 7% simple interest rate payable within 5 years.
Compute for the interest yield.
25
Many persons or institutions are interested to
know the amount that a lender will give to the
borrower on the maturity date.

For instance, you may be interested to know the

total amount of money in a savings account after t
years at an interest rate (r).
This amount is called the maturity value or future
value (F).
GENERAL MATHEMATICS 26
 ILLUSTRATIVE EXAMPLES:

7. Find the maturity value if 1

million pesos is deposited in a
bank at an annual simple interest
rate of 0.25% after (a) 1 year and (b)
5 years?
27
Accumulation
and Discounting
Accumulation is the
process of finding the
future value.
Discounting is the
process of determining
the present value of any This Photo by Unknown Author is licensed under CC BY-NC

amount due in the

future.
GENERAL MATHEMATICS 28
 ILLUSTRATIVE EXAMPLES:

8. Accumulate Php 18 000 at 8%

simple interest rate for 5 years and
9 months.

29
 ILLUSTRATIVE EXAMPLES:

9. Discount Php 500 for 2 years at

6% simple interest.

30
ACTIVITY:
Complete the table below by completing
the unknown component of simple interest.
NO. P R T IS F

1 Php 24 500 5% 4 yrs

2 Php 12 000 6.5% Php 2 730

3 4% Php 2 940 Php 149 940

4 7 ½% 3 Php 9 735

5 Php 67 800 4 ¼ yrs Php 12 246.375

31
COMPOUND INTEREST

GENERAL MATHEMATICS 32
 Objectives:
At the end of the lesson,
you should be able to:
 illustrate simple and
compound interests;
 distinguish between
simple and compound
interests;
This Photo by Unknown Author is licensed under CC BY
GENERAL MATHEMATICS 33
 Objectives:
At the end of the lesson,
you should be able to:
 compute interest, maturity
value or future value, and
present value in
compound interest and;
 solve problems involving
This Photo by Unknown Author is licensed under CC BY compound interest.
GENERAL MATHEMATICS 34
DEFINITION OF TERMS:

Frequency of
Conversion (m)
number of
conversion periods
in one year This Photo by Unknown Author is licensed under CC BY-SA

GENERAL MATHEMATICS 35
DEFINITION OF TERMS:

Compounding or
Conversion or
Interest Period
time between
successive conversions This Photo by Unknown Author is licensed under CC BY-SA

of interest
GENERAL MATHEMATICS 36
DEFINITION OF TERMS:

Nominal rate (r)

annual rate of
interest (may be
compounded more
than once a year)
GENERAL MATHEMATICS 37
DEFINITION OF TERMS:

Periodic rate (i)

rate of interest per
conversion period

GENERAL MATHEMATICS 38
DEFINITION OF TERMS:

Equivalent rates
two annual rates with
different conversion
periods that will earn
the same maturity value
for the same time/term
GENERAL MATHEMATICS 39
DEFINITION OF TERMS:

Effective rate (i(1))

rate when
compounded annually
will give the same
compound each year
with the nominal rate
GENERAL MATHEMATICS 40
DEFINITION OF TERMS:

Compound Interest (Ic)

the interest resulting
from the periodic
addition of simple
interest to the
principal. It is the most common type of
GENERAL MATHEMATICS
payment you will earn by lending 41

your money to a bank.

DEFINITION OF TERMS:

Compound Amount (F)

the final amount when
the interest is periodically
added to the principal,
and this new sum is used
as the new principal for a
certain number of periods
GENERAL MATHEMATICS 42
DEFINITION OF TERMS:

Continuous
Compounding
the interest is
compounded daily.

GENERAL MATHEMATICS 43
Compounding or Conversion periods may
be done:

a. monthly (m = 12)
b. quarterly (m = 4)
c. semi-annually (m = 2)
d. annually (m = 1)
GENERAL MATHEMATICS 44
FORMULA of Compound Amount:

F = P (1 +
FORMULA of Compound Interest:

Ic = P (1 + – P
45

Note: and n = mt
FORMULA of Present Value:

P= or

P=
FORMULAS for Continuous Compounding:

F=

P=
 ILLUSTRATIVE EXAMPLES:

1. Suppose you won ₱10,000 and you plan

to invest it for 3 years. A cooperative group
offers 2% simple interest rate per year. A
bank offers 2% compounded annually.
Which will you choose and why?
48
 ILLUSTRATIVE EXAMPLES:

Investment 1:
Interest (after 3 yrs.) = 10,600 – 10,000 = ₱600
Investment 2:
Interest (after 3 yrs.) = 10,612.08 – 10,000 = ₱612.08
Note:
Simple interest remains constant throughout the
investment term.
In compound interest, the interest from the previous year
also earns interest. Thus, the interest grows every year.
49
 ILLUSTRATIVE EXAMPLES:

2. Find the compound interest

on ₱3,000 for 2yrs at 10% per
annum compounded semi-
annually.
50
 ILLUSTRATIVE EXAMPLES:

3. Find the compound interest

on ₱1,000 at the end of 8 ½
years at 8% compounded
quarterly.
51
 ILLUSTRATIVE EXAMPLES:

4. Accumulate ₱4,000 at 12%

compounded semi-annually for
4yrs and 10 months.

52
 ILLUSTRATIVE EXAMPLES:

5. Find the present value of

₱20,000 due at the end of 30yrs
at 9% compounded monthly.

53
 ILLUSTRATIVE EXAMPLES:

6. Discount ₱1,000 for 3yrs and

8 months at 8% compounded
semi-annually.

54
 ILLUSTRATIVE EXAMPLES:

7. What rate compounded

quarterly, will ₱1,250 amount to
₱1,900 in 10yrs?

55
 ILLUSTRATIVE EXAMPLES:

8. In what time will ₱2,000

amount to ₱3,650 at 4%
compounded semi-annually?

56
 ILLUSTRATIVE EXAMPLES:

9. What effective rate is

equivalent to 10% compounded
quarterly?

57
 ILLUSTRATIVE EXAMPLES:

10. What interest rate

compounded quarterly is
equivalent to 8% compounded
semi-annually?
58
 ILLUSTRATIVE EXAMPLES:

11. What simple interest rate is

equivalent to 10% compounded
semi-annually at the end of year
1?
59
 ILLUSTRATIVE EXAMPLES:

12. Marilyn deposited ₱1,000 in a

bank paying 15% compounded
daily. How much would she have at
the end of two years?
60
 ILLUSTRATIVE EXAMPLES:

13. Donna would like to have

₱5,000 one year from today. How
much should she deposit in a
savings bank paying 10%
converted daily? 61
 CLOSURE:

Depositing money in a bank is like lending

money to the bank in return for which the bank
pays interest.
By contrast, borrowing money from banks or
lending institutions requires payment of
interest.
Hence, money has present and future values.
62
 CLOSURE:

Let us save money! How?

“Do not save what is left after

spending but spend what is left
after saving.” ~Warren Buffett
63
THANK YOU!
 BIG IMAGE

ADD A FOOTER
Lorem ipsum dolor sit amet, consectetuer adipiscing elit. 65
Maecenas porttitor congue massa
Customize this Template

Template Editing
Instructions and
Feedback
66