SHS

General
Mathematics
Quarter 2 – Module 1:
Illustrating and Distinguishing
Simple and Compound Interest
General Mathematics – SHS
Quarter 2 – Module 1: Illustrating and Distinguishing Simple and Compound Interest

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ownership over them.

Regional Director: Gilbert T. Sadsad

Assistant Regional Director: Jessie L. Amin

Development Team of the Module

Writer: Michel C. Bisuña
Editor: Desiree R. Euste
Reviewers: Sarah Christine P. Godoy
Simeon D. Brillantes
Illustrator: Michel C. Bisuña
Layout Artist: Jhomar B. Jaravata
Cover Art: Jed Adra

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Illustrating and Distinguishing Simple and Compound Interest

Introduction

This module will help you illustrate and distinguish simple and compound
interest as these may serve as your guides in making decisions in planning for
investing or borrowing money in the future. This module also provides tasks and
exercises that you will perform for you to be equipped with the necessary skills
and knowledge needed.

Objectives

At the end of this module, you will be able to (a) illustrate simple and
compound interest. (M11GM-IIa-1); (b) distinguish simple and compound interest

Vocabulary List

The following important terms will be used in this module. They are
defined as follows:
a. Time or term (t)– amount of time in years the money is borrowed or invested;
length of time between the origin and maturity dates
b. Principal (P) – amount of money borrowed or invested on the origin date
c. Rate (r) - annual rate, usually in percent, charged by the lender, or rate of
increase of the investment
d. Interest (I) – amount paid or earned for the use of money
e. Simple Interest (Is) - interest computed on the principal and then added to it.
f. Compound Interest (Ic)- interest is computed on the principal and also on the
accumulated past interests
g. Maturity value (A) - or future value is the amount after t years that the lender
receives from the borrower on the maturity value.
h. Lender or creditor – person or institution who invests the money or makes
the funds available
i. Borrower or debtor - person or institution who owes the money or makes the
funds available
j. Repayment Date or Maturity date – date on which the money is borrowed or
loan is to be completely paid.
k. Linear Function – is a function whose graph is a straight line, that is a
polynomial function of degree 0 or 1
l. Exponential Function – is a function in which an independent variable
appears in one of the exponents that is in the form f(x) = a (bP(x)) + c where a,
b and c are elements of real numbers and b > 0 , a ≠ 1 and P(x) is a
polynomial in x. It is also a function whose graph will curve upward.

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 Pre-Test

Direction:
Refer to the problem below. Choose the letter of the correct answer in each of the
following questions.

Angel borrowed P10,000 from a lending business to pay for her tuition which
credits 3% interest per year. At the end of 1 year, she is expected to return the money
amounting to P10,300.

1. From the given problem, what is the principal amount?

a. P10,000 b. P10,300 c. P300 d. P700
2. What is the interest rate?
a. 0.03% b. 3% c. 0.3 d. 30%
3. How long will she pay the borrowed money?
a. 1 year b. 2 years c. 3 years d. 4 years
4. Based on the problem, P 10,300 refers to the_________.
a. Principal amount b. interest c. maturity value d. rate
5. How much is the interest?
a. P10,000.00 b. P10,300.00 c. P300.00 d. P700

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 Learning Activities

There is money in money!

In borrowing or lending money, we get involved in agreements. Some may not

charge you for the borrowed money but in most cases, like borrowing from the banks, certain
amount is being collected on top of the borrowed amount.
If you borrow money or make a loan, you return an amount which is higher than what
you have borrowed. If you save or invest your money in a bank or any financial institution,
the amount returned will be higher than your savings or investment. The difference between
the amount you returned or is returned and the amount you borrowed/ invested is called the
interest. Most of us view interest as “the amount paid for the lender for the use of money”.
There are two types of interests, simple interest and compound interest. The most
common measure of interest is the simple interest.

SIMPLE INTEREST (Is) – is the interest computed on the principal and then added to
it. In symbols,
𝐼𝑠 = 𝑃(𝑟)(𝑡) 𝑜𝑟 𝐼𝑠 = 𝑃𝑟𝑡
Where :
Is = interest
P = principal amount
r = rate
t = time

COMPOUND INTEREST (Ic) – interest is computed on the principal and also on the
accumulated past interests. In symbols,
𝑟
𝐴 = 𝑃(1 + )𝑛𝑡
𝑛
Where :
A = Maturity Value or Amount
P = Principal amount
r = rate
n = number of times interest is compounded per year
t = time (in years)

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To illustrate the two types of interest, we have this:

vs

While both type of interest talks about growing your money, we will be focusing first
on illustrating simple and compound in this lesson. So don’t be stressed up , relax and enjoy
the lesson. By illustrating means showing how simple and compound interest work thus it
includes identifying related terms such as principal amount, time, and rate.

To illustrate more about simple and compound intersts, let us try to answer the
examples below.

Example 1 :

Mr. Cruz is planning to invest his ₱10,000. Two banks offer him a 3%
interest rate. Find which of the two banks offers him a good deal.

Bank A Bank B
Bank A offers a 3% simple Bank B offers a 3% interest
interest payable for 3 years. compounded annually payable for 3
years.

Bank A :

Principal Interest ( Is) Maturity value

Time (t)
(P) Solution Ans (A)
1 (10,000)(0.03)(1) 300 ₱10,300
2 (10,000)(0.03)(2) 600 ₱10,600
3 ₱10,000.00 (10,000)(0.03)(3) 900 ₱10,900
4 (10,000)(0.03)(4) 1200 ₱11,200
5 (10,000)(0.03)(4) 1500 ₱11,500

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Bank B :

Principal Interest (It) Maturity value

Time (t)
(P) Solution Ans (A)
1 ₱10,000.00 (10,000)(0.03)(1) 300 ₱10,300
(10,000)(0.03)(1) + 300 + 309 =
2 ₱10,300.00 ₱10,609
(10,300)(0.03)(1) 609
(10,000)(0.03)(1) + 300 + 309
3 ₱10,609.00 (10,300)(0.03)(1) + + 318.27 = ₱10.927.27
(10,609)(0.03)(1) 927.27
(10,000)(0.03)(1) + 300 + 309 +
(10,300)(0.03)(1) + 318.27 +
4 ₱10,927.27 ₱11,255.09
(10,609)(0.03)(1) + 327.82 =
(10,927.27)(0.03)(1) 1,255.09
(10,000)(0.03)(1) + 300 + 309 +
(10,300)(0.03)(1) + 318.27 +
5 ₱11,255.09 (10,609)(0.03)(1) + 327.82 + ₱11,592.74
(10,927.27)(0.03)(1) + 337.65=
(11,255.09)(0.03)(1) 1,592.74

Which of the two banks

offers him a good deal?
Why?

In the illustration above, bank A offers ₱900.00 simple interest (₱10,900 – ₱10,000 =
₱900) for 3 years, while Bank B offers ₱927.27 interest compounded annually (₱10,927.27 –
₱10,000= ₱927.27) for 3 years. Thus, Bank B is the best option for Mr. Cruz to invest his
money since it offers a higher interest.
Let us have another example.
Example 2:

Elisha is planning to open a clothing store in Naga City but needs additional
funds thus decided to borrow money worth ₱50,000. Two financial institutions offer
her a good deal. ABC Bank offers 2.5% interest rate while ECQ Bank offers the
same interest rate, 2.5% but compounded annually. Both are payable for 5 years.
Which is a better offer for Elisha and why?
Bank A:

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ABC Bank:

Interest ( Is) Maturity

Principal
Time (t) value
(P) Solution Ans (A)
1 (50,000)(0.025)(1) 1,250 ₱51,250
2 (50,000)(0.025)(2) 2,500 ₱52,500
3 ₱50,000 (50,000)(0.025)(3) 3,750 ₱53,750
4 (50,000)(0.025)(1) 5,000 ₱55,000
5 (50,000)(0.025)(1) 6,250 ₱56,250

ECQ Bank:

Principal Interest ( It) Maturity value

Time (t)
(P) Solution Ans (A)
1 ₱50,000 (50,000)(0.025)(1) 1,250 ₱51,250.00
1,250 +
(50,000)(0.025)(1) +
2 ₱51,250 1,281.25 = ₱52,531.25
(51,250)(0.025)(1)
2,531.25
1,250 +
(50,000)(0.025)(1) +
1,281.25 +
3 ₱52,531.25 (51,250)(0.025)(1) + ₱53,844.53
1,313.28 =
(52,531.25)(0.025)(1)
3,844.53
1,250 +
(50,000)(0.025)(1) +
1,281.25 +
(51,250)(0.025)(1) +
4 ₱53,844.53 1,313.28 + ₱55,190.64
(52,531.25)(0.025)(1) +
1,346.11 =
(53,844.53)(0.025)(1)
5,190.64
1,250 +
(50,000)(0.025)(1) +
1,281.25 +
(51,250)(0.025)(1) +
1,313.28 +
5 ₱55,190.64 (52,531.25)(0.025)(1) + ₱56,570.41
1,346.11 +
(53,844.53)(0.025)(1) +
1,379.77 =
(55,190.64)(0.025)(1)
6,570.41

After 5 years, how much is the interest

gained in the two banks? Which is a better
choice for Elisha?

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The interest gained Thus, ABC Bank would
after 5 years in ABC be a better option for
Bank is ₱6,250 Elisha. Since it is a
(56,250 – 50,000) borrowed money, the
while in ECQ Bank is bank that offers the least
₱6,570.41 (56,570.41 interest is the best
– 50,000)

What have you

notice on the
interest gained
from the two
illustration?

In simple interest, In compound interest,

interest is lower interest is higher since it
since it is calculated is calculated on both the
on the principal only principal and the
accumulated interest of
previous period.

In summary, simple interest remains constant throughout

the investment term. In compound interest, the interest varies
or changes since the interest from the previous year also earns
interest. Thus, the interest grows / increases per unit of time.
Keep in mind that in simple interest, only the principal is
earning interest. While in compound interest, the principal and its
interest also earn interest.

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 Let’s take a closer look on
another illustration where the final
amount or maturity value is written
as a function of time.

A. B.
1. A(t) = 3000( 1 + 0.03t) ; t = 2 1. A(t) = 3000 (1 + 0.03)t ; t = 2
2. A(t) = 2000 ( 1 + 0.02t) ; t = 4 2. A(t) = 2000( 1 + 0.02)t ; t = 4
3. A(t) = 1500 (1 + 0.06t) ; t = 3 3. A(t) = 1500 ( 1 + 0.06)t ; t = 3

Observe how each function is written differently. Both functions represent

the maturity value or future value [A(t)] as a function of time t. Column A
represents the maturity value at a simple interest rate which illustrates a linear
function of time t while column B is the maturity value under compound interest
which illustrates an exponential function of time t given that the compounding
period is once a year or annually.

Now, it’s your turn to dig deeper and look for other things which makes Simple Interest
different from Compound Interest!

Let’s check your understanding!

Practice Task 1

Determine the given principal amount or interest, rate, and time in each problem.
1. In a certain bank, Angel invested ₱88,000 in a time deposit that pays 0.5% simple
interest for 3 years.
2. On the 10th birthday of her daughter, Sheina deposited an amount in a bank that
pays 1.2% interest compounded quarterly. How much should she deposit if she
wants to have ₱100,000.00 on her daughter’s 18th birthday?
3. An amount of P30,000 was deposited by a 15 – year old student in a bank that pays
0.7% compounded daily and plans to withdraw after 10 years.
4. Rogel invested ₱25, 000.00 at 16% interest for 6 years.

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 Practice Task 2

Direction:
A. Read the problem carefully and answer each of the following questions.

Ms. Lovely purchased goods amounting to ₱12,000.00. She used two credit cards to pay
₱6,000.00 each. Credit card P charges 3% interest rate per annum while credit card Q
charges 3% interest rate per annum compounded semi-annually.
1. What kind of interest does credit card P illustrate?
2. What kind of interest does credit card Q illustrate?
3. Which credit card will Ms. Lovely have less to pay? Why?

B. Illustrate the given problem below by creating scenarios illustrating either simple or
compound interest.
1. A = Php55,000; r = 3.9% simple interest; t = 2 ½ years
2. P = Php150,000; r = 2.5% interest compounded annually; t = 12 years

Practice Task 3

Direction. Answer each of the following.

Using the same illustration in example 1 in the learning activities, show a graph of the
difference between simple and compound interest using the Maturity Value as Y and the
no. of years or time as X.

Simple Interest:

Principal Interest ( Is) Maturity value

Time (X)
(P) Solution Ans (Y)
1 (10,000)(0.03)(1) 300 10,300
2 (10,000)(0.03)(2) 600 10,600
3 ₱10,000.00 (10,000)(0.03)(3) 900 10,900
4 (10,000)(0.03)(4) 1200 11,200
5 (10,000)(0.03)(4) 1500 11,500

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Compound Interest:

Principal Interest ( It) Maturity value

Time (X)
(P) Solution Ans (Y)
1 ₱10,000.00 (10,000)(0.03)(1) 300 10,300
(10,000)(0.03)(1) + 300 + 309 =
2 ₱10,300.00 10,609
(10,300)(0.03)(1) 609
(10,000)(0.03)(1) + 300 + 309
3 ₱10,609.00 (10,300)(0.03)(1) + + 318.27 = 10.927.27
(10,609)(0.03)(1) 927.27
(10,000)(0.03)(1) + 300 + 309 +
(10,300)(0.03)(1) + 318.27 +
4 ₱10,927.27 11,255.09
(10,609)(0.03)(1) + 327.82 =
(10,927.27)(0.03)(1) 1,255.09
(10,000)(0.03)(1) + 300 + 309 +
(10,300)(0.03)(1) + 318.27 +
5 ₱11,255.09 (10,609)(0.03)(1) + 327.82 + 11,592.74
(10,927.27)(0.03)(1) + 337.65=
(11,255.09)(0.03)(1) 1,592.74

1. What is the graph of the function that illustrates a simple interest? (Hint: Choose either
linear, exponential or quadratic?). How about compound interest? (Hint: Choose either
linear, exponential or quadratic?).
2. Write a function for the simple interest and compound interest.

Well done! You are now ready to take the

next test. Good luck!

Post-Test

Read each question carefully. Choose the letter of the best answer.
For Item number 1-2: Mary Ann borrowed ₱10,000 from a lending firm to start a food
cart business. The firm charges simple interest at an annual rate of 3%.
1. What is the interest rate in decimal?
A. 3.0 B. 0.3 C. 0.03 D. 0.003
2. Given the interest rate, after how many years will the money accumulated up to
₱10,600?
A.1 year B. 2 years C. 3 years D. 4 years
3. Nikko would like to invest ₱40,000.00 to a company that offers 3.7% interest
compounded annually. What is the principal amount?
A. ₱40,000 B. ₱10,000 C. ₱20,000 D. ₱47,000

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 4. Which of the following problems that illustrates simple interest?
A. Ryan investing his ₱40,000.00 to a company that offers 7% interest per
year.
B. China offered ₱3.5 trillion loan to the Philippines at an interest rate of
5.5% interest rate compounded semi-annually.
C. KASAPI lending company charges a 9% interest compounded monthly for
lenders who borrow an amount of at least ₱100,000.00.
D. All of the above
5. Which of the following is true on compound interest?
A. Interest increases after each period of time
B. Investment grows at a slower pace.
C. Returns earned are lower.
D. Interest in each period of time

- Your Post-Test ends here. -

Assignment

Suppose you are a marketing strategist of your own company and wants to attract
more clients like investors. Make a pamphlet showing each of the following:
1. Eye – catching headline
2. Matrix table showing the illustration of simple interest and compound interest
(Note: Teacher may assign this to students by pair, groups, or individual and
randomly selects who will be using the simple interest and compound interest)
3. Requirements
4. How to avail the promo.
RUBRICS: Pamphlet

CATEGORY 4 3 2 1
Graphics Graphics go well Graphics go well Graphics go well Graphics do not
with the text and with the text, but with the text, but go with the
there is a good there are so there are too accompanying
mix of text and many that they few and the text or appear to
graphics distract form the brochure seems be randomly
text “text – heavy” chosen.
Content – All facts in the 99 – 90% of the 89 – 80% of the Fewer than 80%
Accuracy pamphlet are facts in the facts in the of the facts in
accurate pamphlet are pamphlet are the pamphlet
accurate accurate are accurate
Spelling No spelling There is 1 There are 2-3 Several spelling
errors spelling error spelling errors errors
Attractiveness & The pamphlet The pamphlet The pamphlet The pamphlet’s
Organization has has attractive has well – formatting and
exceptionally formatting and organized organization of
attractive well – organized information material are
formatting and information confusing to the
well – organized reader.
information

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 Answer Key

Pre Test :

1. a 2. b 3. a 4. c 5. c

Practice Task 1:
1. Principal Amount = ₱88,000.00 ; rate = 0.5% ; time = 3 years
2. Interest = ₱100,000.00 ; rate = 1.2% ; time = 8 years
3. Principal Amount = ₱30,000.00 ; rate = 0.7% ; time = 3 years
4. Principal Amount = ₱88,000.00 ; rate = 0.5% ; time = 3 years.

Practice Task 2:
A.
1. Simple Interest
2. Compound Interest
3. It is Credit card P because the interest gained in simple interest is much lower
than in compound interest.
B. Answers may vary as to the situation/ characters involved and whether the money is
invested or borrowed
Practice Task 3: the graph can be checked through Geogebra, Desmos app or any
graphing calculator.
1. Linear, Exponential
2.
Simple interest : Y = 10, 000 ( 1 + 0.03x)
Compound interest : Y = 10,000 ( 1 + 0.03)x

Post Test :
1. C 2. B 3. A 4. A 5. A

References:
Bacani, J.B. and Soriano, J.M., (2017) General Mathematics for Grade 11, 151 Quezon City:
Ephisians Publishing Inc.
DepEd (2016). General Mathematics Learners Material First Edition. Department of
Education.
Orence, O.A. (2016). RBS General Mathematics First Edition, Sampaloc, Manila: Rex
Book Store, Inc.
Reyes A., and Sulit, R. (2016), General Mathematics, Jimcyville Publications

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