NAME: ____________________________________ YR & SEC: _____________________ 

 
Competency: 
The learner solves problems involving simple and compound interests. (M11GM-llb-2) 
To the Learners: 
Before  starting  the  module,  I  want  you  to  set  aside  other  tasks  that  will  disturb  you  while 
enjoying  the  lessons.  Read  the  simple  instructions  below  to  successfully enjoy the objectives of this 
kit. ​Have fun! 
1. Follow carefully all the contents and instructions indicated in every page of this module. 
2. Writing  enhances  learning.  Keep  this  in  mind  and  take  note  of  the  important  concepts  in 
your notebook. 
3. Perform all the provided activities in the module. 
4. Let your facilitator/guardian assess your answers using the answer key card. 
5. Analyze the post-test and apply what you have learned. 
6. Enjoy studying! 

Expectations 
 
This module is designed to help you master the following skills: 
● describe situations where simple interest and compound interest is applied 
● determine the difference between simple and compound interests 
● solve  the  interest,  maturity  value,  future  value,  and  present  value  in  simple  interest  and 
compound interest environment 
● solves problems involving simple and compound interests 

Pre - Test 
 

 
A. Match the terms in column A with the correct definitions in Column B. You may choose 
more than one answer from Column B. Write the letter of the correct answer on a 
separate sheet of paper. 
COLUMN A  COLUMN B 
1. conversion or interest period  A. annual rate of interest 
B. frequency of conversion multiplied 
2. frequency of conversion  to time in years 
C. quotient of the annual rate of 
3. nominal rate  interest and frequency of 
conversion 
 4. rate of interest for each conversion  D. time between successive 
period  conversions of interest 
  E. number of conversion periods in 
5. total number of conversion period  one year 
F. two annual rates with different 
6. effective rate  conversion periods that will earn 
the same maturity value for the 
7. equivalent rate  same time/term 
G. rate when compounded annually 
will give the same compound each 
year with the nominal rate; denoted 
by i1    

B. Fill in the blanks. Write the answer on a separate sheet of paper. 

1. When money is compounded monthly, the frequency of conversion is _______. 
2. When the annual interest rate is 16% compounded quarterly the interest rate in a 
conversion period is ______. 
3. If the interest rate per conversion period is 1% and money is compounded monthly, 
the nominal rate is ______. 
4. When the term is 3 years and 6 months and money is compounded semi-annually, 
the total number of conversion period is ______. 
5. When the total number of conversion periods is 12 and the term is 6 years, then 
money is compounded ______. 
 
C. Solve the following word problems. Show the complete solution on a separate sheet of 
paper.   
 
1. How long will it take 13 000 to earn 500 if the interest is 7% compounded 
quarterly? 
2. Ailene invested an amount of P 300,000 at 5% compounded quarterly. How long 
should she let the investment stay if she wants to earn P 40,000?  
3. What nominal rate compounded monthly is equivalent to 10% compounded 
annually? Round off your answer to six decimal places.   
4. The company loaned 80 000 to be used for constructing the new pantry room. 
The bank charges 2% interest compounded monthly. If the company paid a total of 
89 400, how long did they pay the loan?   
5. Marites was given a loan at 10% compounded monthly. When should she pay it so 
that it will just earn only 10% of the amount borrowed?  
 

Looking Back  
 
In the previous lesson, we identify the simple interest, compound interest, and their 
differences. Now let us review the following: 
● Interest is the cost of borrowing money, where the borrower pays a fee to the lender for the 
loan. 
● Generally, simple interest paid or received over a certain period is a fixed percentage of the 
principal amount that was borrowed or lent. 
● Compound interest accrues and is added to the accumulated interest of previous periods, so 
borrowers must pay interest on interest as well as principal.  
● Compound interest is calculated by multiplying the initial principal amount by one plus the 
annual interest rate raised to the number of compound periods minus one. 
● Interest can be compounded on any given frequency schedule, from continuous to daily to 
annually. 
 ● When calculating compound interest, the number of compounding periods makes a 
significant difference 
 

Introduction of the Topic 

 
Interest is important. Understanding interest helps you to make the best decisions. In 
most cases, in the real world interest is calculated with the ​compound interest​ formula. 
  
Definition of Terms 
● Conversion or interest period -​ time between successive conversions of interest 
● Frequency of conversion (m) -​ number of conversion periods in one year 
● Nominal rate ( i(m) ) – ​annual rate of interest 
● Rate (j) of interest for each conversion period -​ quotient of the annual rate of 
interest and frequency of conversion   
● Total number of conversion periods (n) –​ product of the frequency of conversion 
and time in years 
 
 
Finding Interest Rate and Time in Compound Interest   
 
Finding the Number of Periods n, for Compounded Interest: 
Using the formula for maturity value F, present value P, and interest rate j: 
 
F = P (1 + ​j​)n ​  
then   
 
log log F = log log (1 + j )n = (1 + j )   
 
Thus, ​ n = (1+j)  
log log F
 
 
Note that ​n​ must be an integer. Some rounding off may be necessary.  
 
Example 1: ​The company loaned 60 000 to be used for constructing the new comfort 
room. The bank charges 3% interest compounded monthly. If the company paid a total of 
69 697.01 how long did they pay the loan?   
Given: P = 60 000 F = 69 697.01 i(12)
​ ​ = 3% = 0.03 m = 12   
j= i12
m = 0.03
12    
Find: n and t 
Solution:  
(1) Substitute the given values in the maturity value formula 
 
F = P (1 + ​j)​ n ​  
​69 697.01​ = 60 000 (1 + 0.03
12 )​    
n

69 697.01
60 000 = ​(1 + 0.03
12 )​   
n 

 
(2) To solve for n, take the logarithms of both sides 
 
log 6960697.01
000 = log ​(1 + 0.03
12 )​    
n 
  
log 69 697.01
60 000 = n log ​(1 + 0.03
12 )  
   
 
n= log 6960697.01
000
log (1 + 0.03 )
  
 
12

n= 0.065
0.00108   
 
n = 60.18518519 
= 60  ​n
(3) Thus, payments must be made for 60 months, or  
 
t = mn = 1260 = ​5  
 
Answer: The company paid the loan for ​5 years​.   
 
 
Example 2:​ How long will it take 1,000 to earn 300 if the interest is 12% 
compounded semi-annually?   
 
Given: P = 1 000 F = 1 300 i(12)
​ ​ = 12% = 0.12 m = 2   
j= i12
m = 0.12
12 = 0.06 
Find: n and t 
Solution:  
(1) Substitute the given values in the maturity value formula 
 
F = P (1 + ​j)​ n ​  
​1 300​ = 1 000 (1 + 0.12
12 )​    
n

1 300
1 000 = ​(1 + 0.06 )n​     
 
(2) To solve for n, take the logarithms of both sides 
 
log 11 000
300
= log ​(1 + 0.06 )n​      
 
log 1.3 = n log ​(1.06​ )    
  
n = loglog(1.06
1.3
)    
 
n = 0.02530586526
0.1139433523
  
 
n = 4.503  
​n = 5 
 
(3) Because interest is earned only at the end of the period, then 5 six-month 
periods are needed so that the interest can reach 300. Thus, n = 5 and  
 
t = mn = 25 = ​2.5   
 
Answer: It will take ​2.5 years​ for 1000 to earn 300  
 
   
The ​nominal rate of interest​ is the interest rate per year. The rate of compound 
interest is commonly expressed as a nominal rate of interest. For example in 10% 
compounded quarterly, 10% refers to the nominal rate of interest. 
To calculate the nominal rate of interest, simply multiply the rate of interest per period by the 
number of periods per year. 
Nominal Rate = Rate per Period x Periods per Year 
In order to compute the nominal rate of interest, the rate of interest per period should be 
determined. Using the formula ​F = P (1 + ​j)​ n​ ​, take note that j = im ​and ​n = mt. 
m

 
 Example 3: ​Wilson loaned 100 000 from a bank and compound interest is done 
quarterly. If he paid a total of 140 000 after 2 years, what was the interest rate charged 
by the bank?   
Given: P = 100 000 F = 140 000 m=4 t=2 n = mt = (4)(2) = 8  
Find: i(4)​    
Solution 1:  
(1) Substitute the given values in the maturity value formula 
 
F = P (1 + ​j)​ n ​  
​140 000​ = 100 000 (1 + ​j​ )8​    
140 000
100 000 = ​(1 +​j​ )8​     
1.4 = ​(1 +​j​ )8 ​   
 
= 1 + ​j   
1
(1.4) 8
 
– 1 = j​    
1
(1.4) 8
 
j​ = 1.042956042 – 1 
 
​j​ = 0.042956042 
The interest rate per conversion is 4. 29% 
 
(2) The nominal rate (annual rate of interest) can be computed by: 
   
j = im  
m

 
0.042956042 = i4   
4

 
i4 = (0.042956042)(4)  
 
  i4 = 0.1718241688  
 
i4 = 17.18%  
 
 
Answer: The nominal rate is 17.18%   
 
 
 
Solution 2:​ Using the formula ​F = P (1 + j​ ​)n​ ​. Note that j= im
m , ​and we are solving for the 
value of im . Therefore the formula to use now is  
 
Nominal Rate of interest = Periods per year √
( n F uture Amount
P rincipal – 1) 
 
  im = m[ √
n F
P – 1] 
  ​ i4 =4 [
√
8 140 000
100 000 – 1]   
i4 =4 8
[ √1.4 – 1]   
i4 =4 [ 1.04295604219 – 1]   
i4 =4 [ 0.04295604219 ]   
i4 = 0.1718241688  

    i4 = 17.18%  
 
 
 Answer: The nominal rate is 17.18%   
 
Example 4: ​At what rate compounded quarterly will money double itself in 10 years?   
Given: F = 2P m=4 t = 10 n = mt = (4)(10) = 40  
Find: i(4)​    
Solution: F= P ( 1 + j )n  

2P = P ( 1 + j )n    
2= (1 + i)40    
= 1 + j   
1
(2) 40

= j   
1
(2) 40 − 1

j = 0.0175 or 1.75%   
The interest rate in each conversion period is 1.75% 
The nominal rate can be computed by 
j= i4
m    
  0.0175 = i4
4    
i4 = (0.0175)(4)    

i4 = 0.070 or 7% 
Therefore, the nominal rate that will double an amount of money compounded 
quarterly in 10 years is 7%   
Definition of Terms: 
● Equivalent rates –​ two annual rates with different conversion periods that will earn 
the same maturity value for the same time/term  
● Nominal rate –​ annual interest rate (may be compounded more than once a year) 
● Effective rate –​ rate when compounded annually will give the same compound each 
year with the nominal rate; denoted by i1    
 
 
Example 5: W
​ hat effective rate is equivalent to 7% compounded semi-annually? 

Given: i(2)​ ​ = 0.07 m = 2   

Find: effective rate i(1)  

Solution: Since the equivalent rates yield the same maturity value, then  
F​1​ = F​2   
mt
=    
t i(2)
P (1 + i(1) ) P (1 + m )

Dividing both sides by P results to   

mt
=    
t i(2)
(1 + i(1) ) (1 + m )

Raise both sides to 1t to obtain  

 (1 + i(1) ) = (1 + 0.07 4
4 )    
(1 + i(1) ) = (1.0175)
4
   
  
(1 + i(1) ) = 1.071859031   
  i (1)
= 1.071859031 - 1 
i (1)
= 0.071859031  
i(1)
= 7.1859031 or 7.1859% 
Number of Decimal Places   
When solving for an equivalent rate j, it is important to make it very precise. Thus, 
when solving for an equivalent rate, six or more decimal places will be used. 
 
 
 
 
 
   
   
Activities 
 
   
​Activity 1:   
Complete the table by computing for the rates equivalent to the following nominal rates. 
Round off your answer to six decimal places. Show your solution on a separate sheet of 
paper. 
   
Given Interest Rate  Equivalent Interest Rate 
15% compounded monthly  _______ compounded annually 
10% compounded monthly  _______ compounded annually 
7% compounded monthly  _______ compounded annually 
 
​Activity 2: Solving word problems involving simple interest. 
 
  Answer the following questions. Show your solution to support your answer. 
 
1. Josephine loaned 30 000 to be used for new business. The bank charges 5% interest 
compounded monthly. If she paid a total of 39 500, how long did she pay the loan?   
2. How long will it take 10,000 to earn 700 if the interest is 7% compounded 
semi-annually?   
3. Corazon loaned 125 000 from a bank and compound interest is done semi-annually. If 
she paid a total of 138 000 after 2 years, what was the interest rate charged by the 
bank?   
4. How long will a principal earn 50% of this amount at 6% compounded quarterly?  
5. Erica must pay P18,500 to pay an obligation of P15,000 at 6% compounded monthly. 
When should this payment be given?  
6. Vienne is planning to invest P40,000. At what rate compounded semi-annually will 
accumulate her money to P45,000 in 3 years?  
7. What nominal rate compounded monthly is equivalent to 20% compounded annually? 
Round off your answer to six decimal places.  
8. What simple interest rate is equivalent to 10% compounded semi-annually at the end of 
year 1?   
 
 

Remember 
 

Definition of Terms 
● Conversion or interest period -​ time between successive conversions of interest 
● Frequency of conversion (m) -​ number of conversion periods in one year 
● Nominal rate ( i(m) ) – ​annual rate of interest 
● Rate (j) of interest for each conversion ​period​ -​ quotient of the annual rate of interest 
and frequency of conversion   
● Total number of conversion periods (n) –​ product of the frequency of conversion and 
time in years 
● Equivalent rates –​ two annual rates with different conversion periods that will earn the 
same maturity value for the same time/term  
● Effective rate –​ rate when compounded annually will give the same compound each year 
with the nominal rate; denoted by i1    
   
 
​Check your Understanding  
 
Activity 3: ​Solve the following. Show your solution to support your answer.   
 
1. At what interest rate compounded quarterly should an amount be invested if the interest 
earned is 25% of the invested amount for 5 years?  
2. Mr. Cruz was given a loan at 15% compounded monthly. When should he pay it so that it 
will just earn only 15% of the amount borrowed? 
3. Rio invested an amount of P 500,000 at 3% compounded quarterly. How long should she 
let the investment stay if she wants to earn P 60,000?  
4. Ronel invested an amount of P 100,000 where he obtained an interest of 15 ,000at the 
end of 2 ½ years. At what nominal rate compounded semi-annually was it invested?  
5. Adrienne loaned 120 000 to be used for new business. The bank charges 4% interest 
compounded monthly. If she paid a total of 150 000, how long did she pay the loan?   
6. How long will it take 8,000 to earn 200 if the interest is 5% compounded 
quarterly? 
7. How long will a principal earn 30% of this amount at 5% compounded quarterly? 
8. What nominal rate compounded semi-annually is equivalent to 12% compounded 
annually? Round off your answer to six decimal places.   
 
 
 
 
 
 
Activity 4: ​Complete the table by computing for unknown values. In numbers 3, 6, and 9, 
round off your answer to six decimal places. 
 
          Rate per 
    Frequency of  Interest Rate  Equivalent Nominal Rate  period, based 
Nominal  Interest  Conversion  per Period  on rate and 
Rate  compound  Periods  period from 
previous 
column 
8%  quarterly  (1)__________  (2)__________  (3)_________​compounded  (4)__________ 
semi-annually 
12%  monthly  12  (5)  (6)_________​compounded  (7)__________ 
semi-annually 
15%  semi-ann 2  (8)  (9)_________​compounded  (10)_________ 
ually  semi-annually 
 
Activity 5: C​ omplete the table by finding the unknown time and rate. 
 
P  i(m) Interest  m  Interest  t  Number of  Compound  Maturity 
compound  rate per  conversion  interest  value 
period 
6 000  (11)___  quarterly  (12)___  (13)____  6  (14)____  (15)____  7 800 
70 000  11%  semi-  (16)___  (17)____  (18)___  (19)____  10 000  (20)____ 
annually 
 
 

Post – Test 
 
A. Match the terms in column A with the correct definitions in Column B. You may 
choose more than one answer from Column B. Write the letter of the correct answer 
on a separate sheet of paper. 
COLUMN A  COLUMN B 
1. conversion or interest period  A. annual rate of interest 
B. frequency of conversion multiplied 
2. frequency of conversion  to time in years 
C. quotient of the annual rate of 
interest and frequency of 
3. nominal rate  conversion 
D. time between successive 
4. rate of interest for each conversion  conversions of interest 
E. number of conversion periods in 
period  one year 
  F. two annual rates with different 
5. total number of conversion period  conversion periods that will earn 
the same maturity value for the 
6. effective rate  same time/term 
G. rate when compounded annually 
will give the same compound each 
7. equivalent rate  year with the nominal rate; denoted 
by i1  

B. Fill in the blanks. Write the answer on a separate sheet of paper. 

 
1. When money is compounded monthly, the frequency of conversion is _______. 
2. When the annual interest rate is 16% compounded quarterly the interest rate in a 
conversion period is ______. 
3. If the interest rate per conversion period is 1% and money is compounded monthly, 
the nominal rate is ______. 
 4. When the term is 3 years and 6 months and money is compounded semi-annually, 
the total number of conversion period is ______. 
5. When the total number of conversion periods is 12 and the term is 6 years, then 
money is compounded ______. 
 
C. Solve the following word problems. Show the complete solution on a separate sheet 
of paper.  
 
6. How long will it take 13 000 to earn 500 if the interest is 7% compounded 
quarterly? 
7. Ailene invested an amount of P 300,000 at 5% compounded quarterly. How long 
should she let the investment stay if she wants to earn P 40,000?  
8. What nominal rate compounded monthly is equivalent to 10% compounded 
annually? Round off your answer to six decimal places.   
9. The company loaned 80 000 to be used for constructing the new pantry room. 
The bank charges 2% interest compounded monthly. If the company paid a total of 
89 400, how long did they pay the loan?   
10.Marites was given a loan at 10% compounded monthly. When should she pay it so 
that it will just earn only 10% of the amount borrowed?  

Reflection 
​

Direction: After the discussion ,lessons ,and studies the learner should 
answer the following question to be able to know whether the learner attain 
some level of knowledge learned in this session. 
1. I’ve learned in this lessons were________________________________________________ 
____________________________________________________________________________ 
 
2. I can use what I have learned in real-life and everyday situations such as 
______________________________________________________________________ 
____________________________________________________________________________ 
 
 
3. While answering the module, I have learned that 
___________________________________ 
____________________________________________________________________________ 
 
4. Sharing with my friends and family the knowledge on 
___________________________________________________________________________ 
___________________________________________________________________________ 
 
5. Well, the lesson is __________________________________________________________ 
____________________________________________________________________________