SIMPLE

INTEREST
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OBJECTIVES:
A. Define terms related to simple interest;
B. Describe situations where simple interest is applied;
C. Solve problems involving interests.

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Simple Interest
Interest that is computed on the principal. The
interest remains constant throughout the term.

It is an interest which is computed entirely at once from the

moment the money is borrowed or invested until it will be paid.
It is computed by multiplying the principal, the rate, and the
time in years.

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Lender or creditor
- person (or institution) who invests the money or
makes the funds available.

Borrower or debtor
- person (or institution) who owes the money or avails
of the funds from the lender.

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Origin or loan date
- date on which money is received by the borrower.

Repayment date or maturity date

- date on which the money borrowed or loan is to be
completely repaid.

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Time or term (t)
- amount of time in years the money is borrowed or
invested; length of time between the origin and
maturity dates .
Principal (P)
- amount of money borrowed or invested on the
origin date
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Rate(r)
annual rate, usually in percent, charged by the lender,
or rate of increase of the investment

Interest (I)
- amount paid or earned for the use of money

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Maturity value or future value (F)
amount after t years that the lender receives from the
borrower on the maturity date.

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𝑅 𝐸 𝑆 𝑃 𝐸 𝐶 𝑇

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 simple interest
principal
interest rate
term

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SIMPLE INTEREST
It is an interest which is computed entirely at once from the moment the
money is borrowed or invested until it will be paid. It is computed by
multiplying the principal, the rate, and the time in years. In symbols,

𝐼 𝑠= 𝑃𝑟𝑡
Where is the simple interest;
is the principal (amount invested or borrowed);
is the simple interest rate;
is the length of time/ term of time in years;
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SIMPLE INTEREST

𝐼 𝑠= 𝑃𝑟𝑡
𝐼𝑠 𝐼𝑠 𝐼𝑠
𝑃= 𝑟= 𝑡=
𝑟𝑡 𝑃𝑡 𝑃𝑟

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MATURITY VALUE/ FUTURE VALUE

𝐹 =𝑃 + 𝐼 𝑠
𝐹 =𝑃 +𝑃𝑟𝑡
𝐹 =𝑃 (1+𝑟𝑡)

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Illustrative Example:
1. Louie borrowed an amount of Php200,000 at from L.O.V.E Lending
Corporation. The loan is payable after 1 year and 3 months. Find the simple
interests and the amount to be paid on the due date.
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SOLUTION: Given: 𝑃=Php 200,000 𝑟 =3.75 % 𝑡 = 𝑦𝑒𝑎𝑟𝑠
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𝑈𝑛𝑘𝑛𝑜𝑤𝑛: 𝑆𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 ( 𝐼 𝑠 ) 𝑎𝑛𝑑 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒( 𝐹 )
For simple interest: For maturity value:
𝐼 𝑠= 𝑃𝑟𝑡 𝐹 =𝑃 + 𝐼 𝑠
¿
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(200,000)(0.0375) 12 ( ) ¿
200,000 +9,375
𝐼 =¿𝑃h𝑝 9,375
𝑠 𝐹=¿𝑃h𝑝 209 , 375
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 Lets investigate!

I currently have Php5,000 and I want this to become more than

Php6,000 after 1 year and 3 months. What will I do?

Let’s invest your money at 5%, 9% or 17% simple

interest rates in a bank near here.
That’s a good idea. But, which of the interest rates will make my
money beyond Php6,000 in 1 year and 3 months?

………………………………………………………
……………(thinking)
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