SIMPLE INTERESTS

“When you saved money in the bank, you will gained an interest paid by
the bank. On the other hand, when you borrow money, you are charged an
interest on the amount you borrowed. How does gained and charged
interests computed?”
A debtor pay the bank an amount which is more than the amount
they borrowed. An investor may withdraw from the bank more
than the amount deposited. This additional sum is called
INTEREST.
 Definition of terms:

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.
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
loaned is to be completely repaid.
Time or term (t) – amount of time in years the money is borrowed or
invested; length of time between the origin and maturity dates.
 Definition of terms:

Principal or present value (P) – amount of money borrowed or invested

on the origin date.
Rate of interest or simply 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.
Maturity Value or Future Value (F) – amount after t years that the
lender receives from the borrower on the maturity date; equal to the sum
of principal and the interest earned.
Simple Interest (Is)

For every financial transaction, whether you borrowed or

invested a certain amount P, a corresponding percentage of the
principal called interest is being paid. Simple Interest (Is) is
the interest charged on the principal alone for the entire
duration or period t of the loan or investment, at a particular
rate r. After the term of the loan or investment, the maturity
value or future value F is computed by getting the sum of the
principal and the interest due.
 Example.
Directions: Complete the table below by solving the unknown quantities in each row.

Principal Rate Time Simple Interest Future Value

(P) (r) (t) (Is) (F)
1.)
₱500,000.00 12.5% 10 years

2.)
2.5% 4 years ₱1,500.00

3.)
₱36,000.00 1 year and ₱4,860.00
6 months
4.)
₱250,000.00 0.5% ₱1,400.00

5.)
₱10,000.00 4% 5 months
 Answer the following problems involving simple interest. Write
your complete solutions and answers on a 1 whole sheet of paper.

Find the simple interest on a loan of ₱65,000.00 if the loan is given at

a rate of 2% and is due in 5 years and 3 months?

How much money will you have after 4 years if you deposited
₱10,000.00 in a bank that pays 6% simple interest?