01

02

The 03

Mathematics 04

05

of Finance 06
 Learning 01

Outcomes 02

At the end of this Chapter, the students 03

must be able to:
04
1. Distinguish simple interest from
compound interest; 05

2. Solve problems on simple and 06

compound interest; and

3. Differentiate credit cards from
consumer loans, stocks, bonds and
Simple and Compound Interest 01

Interest is the amount paid for the 02

use of money. It is also paid for 03

the money
The moneybarrowed
depositedfrom a bank.
or borrowed 04

is called 1the principal

Team 03 (P),
Team 04 the
05

money paid for its use is called 06

interest (I), and how much is to be

paid per P100 is called the rate of
interest (r) including the time (t)
Simple Interest 01

It is the interest that does not 02

become part of the principal. The 03

formula is I=Prt or A= P(1+rt) 04

where 1
05

P = the Principal amount of 06

money/to be invested
r= Interest Rate r% per period of t
t= Number of Time Periods.
Example 01

1. A: 2-year loan of ₱500 is made with 02

4% simple interest. Find the 03

interest earned.
Solution Formula: I = Prt 04

: = (500)(0.04)(2) 05

P= I = ₱40 06

₱500

r = 4%
or 0.04
Example 01

2. A: business takes out a simple interest 02

loan of ₱10, 000 at a rate of 7.5%. 03

What is the total amount the business
04
will repay if theUsing
Solution: loan the
is for 8 years?
simple interest
05
I=? formula for future value:
P= A = P(1+rt)
06

₱10,000 = 10,000(1+(0.075)(8))
r = 7.5% or A = ₱16, 000
0.075
Example 01

3. :
Ryan bought  ₱15,000 from a bank to 02

buy a car at 10% interest rate. At the 03

end of the period, 9,000 is interest while 04
clearing the  loan. Find the time for
Solution:
05
Iwhich the loan was given.
= ₱ 9,000
P = 15,000 06

r = 10% or
0.1
t=?
Exampl 01

4 e Ariel takes a loan from a bank to buy a 02

used truck at the rate of 9 % simple 03

Interest. The annual calculate interest
04
Solution:
was $720. Find  the initial principal
Imoney.
= $720 05

P=? 06

r = 9% or
0.09
t=1
 Exampl 01
5 Sarah
e deposits $4,000 at a bank with an
02
interest rate per year. She deposits
money for 3 years with a total interest of 03

$540. What is the interest rate of Sarah’s 04

money per year?  05

Solution: 06
I = $540
P = $4,000
r=?
t=3
 Compound Interest 01

  02

03

04
where:
A = the future value of the investment/loan, including interest 05

P = the principal investment amount (initial deposit or loan amount)

06
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
 Exampl 01

1 If ane amount of $5, 000 is deposited into a 02

savings account at an annual interest rate of 5%,
compounded monthly, the value of the 03

investment after
 
10 years is? 04
Solution:
A=? 05

P = $5, 000 06
r = 5% or 0.05
n = 12
t = 10
 Exampl 01

2 e is the value of an investment of

What 02

$3,500 after 2 years if it earns 1.5% 03

compounded quarterly?
04
Solution:  
A=? 05
P = $3, 500
r = 1.5% or 06

0.015
n=4
t=2
 Exampl 01

3 If ane amount of $10,000 is deposited into 02

a savings account at an annual interest
03
rate of 4%, compounded semi-annually,
the value of the investment
 
after 5 years 04

is? Solution: 05

A=? 06
P = $10, 000
r = 4% or 0.04
n=2
t=5
 Exampl 01

4 e compound amount which would be obtained from

Find the
02
the interest of ₱2,000php at 6% compounded quarterly for
5 years. 03

Solution:  
04
A=?
05
P = ₱2, 000
06
r = 6% or 0.06
n=4
t=5
 Example of finding the rate given other values
01

5 Mrs. Jefferson purchased an antique statue for 02

$450. Ten years later, she sold this statue for
03
$750. If the statue is viewed as an investment,
 
what annual rate did she earn? 04
Solution:  
05
A = $750
P = $450 06

r=?
n=1
t = 10
 Credit Cards and Consumer 01

Loans
According to Latoya Irby 02

(2019), a credit card is plastic

03
card that lets access the credit
limit your credit issuers gives 04
you while a loan is a loan or
borrowed money given to 05

consumers to finance specific 06

types of expenditures.
 Credit Cards and Consumer 01

Loans 02
Janet Berry Johnson
03
(2019) discussed that
APR (annual percentage 04

rate) is one of the key 05

factors you should
06
consider when shopping
for a credit card.
 Annual 01

Percentage
It refers to the yearlyRate
interest generated
02

by a sum(APR)that's charged to borrowers 03

or paid to investors. APR is expressed 04

as a percentage that represents the 05

actual yearly cost of funds over the 06

term of a loan or income earned on an

investment.
Introductory/Promotional Cash Advance 01

APR APR 02

⮚ A rate you might get ⮚The rate you

03
as a new customer pay for getting
⮚ These rates may cash from an 04

start low, but they ATM (or other 05

have an expiration cash-like 06

date, and your rate transactions)

will rise in time. ⮚Rates tend to be
high, and you
 Penalty A Balance Transfer APR 01

PR 02
⮚ A rate increase due ⮚The rate you pay
to late payments  on debt you move 03

⮚ Your rate rises, but over to your credit 04

you may be able to card. 05

reduce the rate with ⮚You might start 06

a series of on-time with a low

payments.   promotional rate
and face a rate
 Consumer Loans 01

02

A consumer loan is a type of 03

loan in which you take on a 04
personal debt to pay for goods 05
or services. In the Philippines, 06
common types of consumer
loans that are offered by banks
are auto loans, motorcycle
 Types of Consumer Loans
01

Mortgages - used by consumers to 02

finance the purchase of a house 03

Credit cards - used by consumers to 04

finance everyday purchases 05

Auto loans - used by consumers to 06

finance the purchase of a vehicle

Student loans - used by consumers
to finance education
 Stocks, Bonds, and Mutual funds 01

02

Stocks, bonds, and mutual funds are 03

well known and powerful components 04
of a diversified portfolio. To achieve 05
desired returns to accomplish goals, it 06
is extremely important to make sure
there are different types of
investments in a portfolio.
 Stocks 01

02

It is a type of investment designed to 03

aid governments and corporations to 04

raise money. It can be viewed as a 05

type of loan. There is no stock 06

ownership and dividends, but

investors who purchase bonds do
receive payment in the form of
 Bonds 01

02

⮚ These are considered to be a safer 03

investment. It is important to note 04

that bonds are not completely risk- 05

free and only receive preference in 06

case of bankruptcy.
⮚ Bond investments play a key role in
balancing and reducing the short-
 Mutual funds 01

02

⮚ mutual funds are pooled investment 03

vehicles. In a mutual fund, money 04

collected from various investors is 05

taken together to buy a large variety 06

of securities.
⮚ A mutual fund gives an investor
instant diversification.
 Home Ownership 01

02

Home ownership, basically, means 03

owning a house. Owning a house 04

comes in several steps such as 05

planning for a house, setting aside 06

the money required for down-

payment over a period of time,
looking out for a property, bargaining,
Housing Loan Options Based on Financing Scheme
01
in the Philippines
02

1. Bank 03

financing 04

2. Pag-IBIG
05

06
housing loan
3. In-house
financing
 01

02

03

Thank
Do you have any
04

05

you!
question ?
06