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Simple Interest
Objectives
● What is an interest?
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Interest
1 amount that a person gets or pays on top of the original investment or loan
Example:
Lender or creditor
2 refers to the party lending money or extending credit
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Borrower or debtor
3 refers to the party using the money or credit
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Principal
4 refers to the amount of money extended for credit or the amount of money
deposited in a bank for safekeeping
Example:
Interest Rate
5 refers to the charged amount for using the money over a certain period;
commonly expressed in percent, but is converted to decimal
Example:
Time of interest
6 refers to the period covered from the time that the money (principal) is borrowed
until its due date
Example:
Maturity Date
7 due date of the payment of the principal
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Simple Interest
8 refers to an interest computed on the original principal during the whole period
or time of borrowing
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𝐼 =𝑃𝑟𝑡
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Maturity Value
10 refers to the sum of the principal and interest; sometimes called as the future
value of the principal amount
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11
M
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Example:
In the example from the previous slide, the maturity value will
be the sum of ₱100 and ₱5 which is ₱105. This is the amount
that the borrower needs to pay the lender.
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3. How long will it take for a deposit of ₱1, 500.00 to earn ₱186.00
invested at the rate of 7.5% ?
Interest
1 amount that a person gets or pays on top of the original investment or loan
2 Lender or creditor
refers to the party lending money or extending credit
Borrower or debtor
3 refers to the party using the money or credit
4 Principal
refers to the amount of money extended for credit or the amount of money
deposited in a bank for safekeeping
Key Points
Interest rate
5 refers to the charged amount for using the money over a certain period;
commonly expressed in percent, but is converted to decimal
6 Time of interest
refers to the period covered from the time that the money (principal) is borrowed
until its due date
Maturity Date
7 due date of the payment of the principal
Key Points
8 Simple Interest
refers to an interest computed on the original principal during the whole period
or time of borrowing
9
Key Points
Maturity Value
10 refers to the sum of the principal and interest; sometimes called as the future
value of the principal amount
11
Synthesis