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Simple Interest

This document discusses simple interest, which is interest paid proportional to the time principal is used. It provides the formulas for calculating interest (I), future amount (F), and future amount using simple interest. It defines discount as the difference between future worth and principal amount. It also gives sample problems calculating simple interest and discount rates.

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Conchito Galan Jr II
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382 views8 pages

Simple Interest

This document discusses simple interest, which is interest paid proportional to the time principal is used. It provides the formulas for calculating interest (I), future amount (F), and future amount using simple interest. It defines discount as the difference between future worth and principal amount. It also gives sample problems calculating simple interest and discount rates.

Uploaded by

Conchito Galan Jr II
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ENGINEERING ECONOMY

Simple Interest
Interest - is the money paid for the use of borrowed capital.
Simple Interest
Is the interest to be paid which is proportional to the length of
time the principal is used.
Formulas

1. I = P i n
2. F = P + I
3. F = P (1 + in)
where: I = interest P = principal
F = future amount n = no. of years
i = rate of interest per year
Note:
For Ordinary interest: 1 yr = 360 days
For Exact interest: 1 yr = 365 days
For leap year (exact interest): 1 yr = 366 days
Actual number of days per month:
January = 31 July = 31
February = 28 or 29 August = 31
March = 31 September = 30
April = 30 October = 31
May = 31 November = 30
June = 30 December = 31
Discount
Is the difference between the future worth and the principal
amount.
O − A
1. Discount = O – A 2. Discount Rate =
O
Sample Problems
1. A bank charges 12% simple interest on a P300 loan. How
much will be paid if the loan is paid back in one lump sum
after 3 years?
2. Determine the exact simple interest on P5,500.00 for the
period from January 10, 1996 to October 28, 1996 at 11%
interest.
3. A man borrowed P500,000.00 from a bank and agreed to
pay the loan at the end of a months. The bank discounted the
loan and gave him P450,000 in each. What is the rate of
discount?
4. Fred wanted to buy refrigerator which will have a price of
P13,000 for 90 days from now due to the increase in prices of
12 percent simple interest. What is the present worth of
refrigerator?
5. If the future is 25% more than the principal after 8 months,
determine the simple interest rate.

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