Interest is the amount earned for the use of

money or of money deposited in a bank.

Interest is charged using one of two methods:
1. Simple Interest

2. Compound Interest

Principal is the amount lent or deposited.

The amount of interest paid is given as a

percent of the principal and is called the
interest rate.
The interest paid on the original principal is called
simple interest. This can be computed using the
formula:
𝐼 = 𝑃𝑟𝑡
Where I is the interest;
P is the principal;
r is the rate of interest;
t is the annual time period

When time is given in months,

𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠 (𝑎𝑐𝑡𝑢𝑎𝑙 𝑡𝑖𝑚𝑒)
𝑡=
12
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠
When time is given in days, 𝑡 =
360

Note: This is known as ordinary time or Bankers’ rule.

Example: A loan of Php.100,000 has been
issued for 5-years. Compute the amount to be
repaid to the lender if simple interest is
charged at 5% per year.
Solution;
P = Php.100,000; 𝐼 = 𝑃𝑟𝑡
𝐼 = 100,000𝑥5%𝑥5
r= 5%; 𝐼 = 100,000𝑥0.05𝑥5
t =5; 𝐼 = 25,000

In 5 years the interest paid is Php25,000.

The accumulated amount is also called future
value or maturity value designated as F. It is
calculated using the formula,
𝐹 = 𝑃 + 𝐼 = 𝑃 + 𝑃𝑟𝑡 = 𝑃(1 + 𝑟𝑡)
Where: F is the final amount,
I is the interest
r is rate
t is time
Example: A loan of Php.100,000 has been issued for
5-years. Compute the amount to be repaid to the
lender if simple interest is charged at 5% per year.
Solution;
𝐼 = 𝑃𝑟𝑡
P = Php.100,000; 𝐼 = 100,000𝑥5%𝑥5
r = 5%; 𝐼 = 100,000𝑥0.05𝑥5
𝐼 = 25,000
t =5;
𝐹 = 𝑃+𝐼
𝐹 = 100,000 + 25,000
𝐹 = 125,000

In 5 years the interest paid is Php25,000 and the

accumulated or final amount is Php125,000.
 Using the formula for calculating the interest,
other formulas can be derived from it.

1.To find the time, we have the formula:

𝐼
𝑡=
𝑃𝑟
2.To find the rate, we have the formula:
𝐼
𝑟=
𝑃𝑡
3.To find the principal, we have the formula:
𝐼
P=
𝑟𝑡
4.To find the principal, when the
final amount is given:
𝐹
𝑃=
1+𝑟𝑡
Example: At what rate is interest paid, if the
interest earned by Php6,000 for 2 years is
Php450?
Solution:

𝐼 = 𝑃𝑟𝑡
Given: 𝐼 𝑟
P= Php6,000 =
𝑃𝑡 𝑃𝑡
t = 2 years 𝐼 450
r=? 𝑟= = = 0.037 = 3.75%
𝑃𝑡 6,000 × 2
I = Php450
(Multiply 0.037 with 100 to get 3.75%)

Therefore, the rate of interest is 3.75%.

Example: What is the interest paid at the end
of 3 years for Php12,000 at an interest rate of
4%?
Solution:
Given:
t = 3 years 𝐼 = 𝑃𝑟𝑡
4
r = 4% = 100 =0.04 𝐼 = 12,000 × 0.04 × 3
= 1,440
P = 12,000

Therefore, in 3 years the interest paid is

Php1,440.
Example: How long was Php20,000 invested if
it earned an interest of Php1,200 at 5%?
Solution:

𝐼 = 𝑃𝑟𝑡
Given: 𝐼 𝑡
P = Php20,000 =
𝑃𝑟 𝑃𝑟
t=? 𝐼 1,200
𝑡= = = 1.2
I = Php1,200 𝑃𝑟 20,000 × 0.05
r = 5% = 0.05

Therefore, in 1.2 years the interest will be

paid.
Example: How much should be repaid by the
debtor at the end of 18months for Php45,000 if
money paid at 2%?
Solution:

𝐹 = 𝑃 1 + 𝑟𝑡
Given: 18
P= Php45,000 = 45,000 1 + 0.02
12
t = 18 months = 46,350
r = 2% = 0.02
F=?

Therefore, the future value is Php46,350.

 I=Prt
where time is in number of days

Exact Simple Interest:

Ordinary Simple Interest: 𝐷
𝐼𝑒 = Pr
𝐷 365
𝐼𝑜 = Pr Or
360 𝐷
𝐼𝑒 = Pr (Leap Year)
366
Example:
Find the ordinary and exact simple interest of
Php15,000 if it is invested at 12% for 60 days.
Solution:
Ordinary Simple Interest: Exact Simple Interest:
𝐷 𝐷
𝐼𝑜 = Pr 𝐼𝑒 = Pr
360 365
Given: 60
60
P = 15,000 𝐼𝑜 = 15,000(0.12) 𝐼𝑒 = 15,000 .012
360 365
r = 12% = 0.12 1 12
t = 60 days 𝐼𝑜 = 15,000(0.12) 𝐼𝑒 = 15,000 0.12
6 73
𝐼𝑜 = 300 𝐼𝑒 = 295.89

Therefore, the ordinary and exact simple

interest is Php300 and Php295. 89.
Example:
To renovate a portion of her house, Mrs. Daniega made a
loan of Php48,000 from a bank that charges 16%
interest. How much did she pay the bank after 120 days
using the ordinary – interest method?
Solution:
Ordinary Simple Interest:
𝐷
𝐼𝑜 = Pr
Given: 360 Future value:
120 𝐹 = 𝑃 + 𝐼𝑜
P = 48,000 𝐼𝑜 = 48,000(0.16)
r = 16% = 0.16 360 𝐹 = 48,000 + 2,560
1
t = 120 days 𝐼𝑜 = 48,000(0.16) 𝐹 = 50,560
3
𝐼𝑜 = 2,560

Therefore, the amount repaid after 120 days is

Php50,560 with the ordinary exact simple interest of
Php2,560.
Example:
Find the maturity value of Php4,250 at 9% for
90days using the exact simple method.
Solution: Maturity value/Future value:
𝐹 = 𝑃 + 𝐼𝑒
Exact Simple Interest: 𝐹 = 4,250 + 94.32
𝐷 𝐹 = 4,344.32
𝐼𝑒 = Pr
Given: 365
90 Or
P = 4,250 𝐼𝑒 = 4,250(0.09) 𝐹 = 𝑃 1 + 𝑟𝑡
r = 9% = 0.09 365
18 90
t = 90 days 𝐼𝑒 = 4,250(0.09) 𝐹 = 4,250 1 + (0.09)
73 365
𝐼𝑒 = 94.32
𝐹 = 4,344.32

Therefore, the maturity value is P4,344.32.

Example:
Find the time if the ordinary simple interest on
Php6,000 at 10% is 200 pesos.
Solution:
𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑜𝑓
𝐼𝑜
𝑡= 𝑦𝑒𝑎𝑟𝑠 𝑡𝑜 𝑑𝑎𝑦𝑠:
𝑃𝑟 1 360 𝑑𝑎𝑦𝑠
Given: 200 𝑦𝑒𝑎𝑟𝑠
𝑡= 3 1 𝑦𝑒𝑎𝑟
t=? 6,000(0.10)
200 360
P = 6,000 = 𝑑𝑎𝑦𝑠
𝑡= 3
r = 10% = 0.10 600
1 = 120 𝑑𝑎𝑦𝑠
𝐼𝑜 = 200 𝑡=
3

Therefore, the if the ordinary simple interest on

Php6,000 at 10% is Php200, hence time is 120 days.
Two types ways of finding time between two
days given.
1. Exact time as the names implies, is the
exact number of days as found from a
calendar.
2. Approximate time is found by assuming
each month to have 30 days.
Example: Find the number of days from April 12,
2002 to October 25,2003.
Solution:
a. Approximate Time
Year Month Days Note:
October 25, 2003 10 25 1 year = 12 months
2003 1 month = 30 days
(in approximate
April 12, 2002 4 12 date)
2002
Difference: 1 6 13

Hence, we have 1 year, 6 months and 13 days, so

30 𝑑𝑎𝑦𝑠 30 𝑑𝑎𝑦𝑠
12𝑚𝑜𝑛𝑡ℎ𝑠 × + 6𝑚𝑜𝑛𝑡ℎ𝑠 × + 13 𝑑𝑎𝑦𝑠
1 𝑚𝑜𝑛𝑡ℎ 1 𝑚𝑜𝑛𝑡ℎ
360 𝑑𝑎𝑦𝑠 + 180 days + 13days = 553 days
Therefore, the approximate time from April 12, 2002 to October 25, 2003
is 553 days,
. Exact Time
Months Days Days Note:
(based on (based in We have April (30 - 12),
Calendar Calendar) since the month of
April in the calendar
2002 2003 Sum: has 30 days and the
April (30 - 12) 18 30 48 given starts at April 12,
May 31 31 62 so we need to subtract.
Same with October, we
June 30 30 60 will only have 25 days
July 31 31 62 since the given ends at
August 31 31 62 October 25,2003.

September 30 30 60
October 31 25 56
November 30 30
Therefore, the exact
December 31 31 time from April 12,
January 31 31 2002 to October 25,
2003 is 561 days.
February 28 28
March 31 31
Sum: 561
Example: Find the number of days from April 12,
2002 to October 25,2003.
Solution:
b. Exact Time:
Using table:
Note:
Month Days in Table We added 365 to 298
October 25, 2003 298+365=663 because October is
April 12, 2002 102 in year 2003.

Difference: 561 days

Therefore, the exact time from April 12, 2002 to October 25, 2003 is 561
days,
Example:
On May 4, 2002, Mrs. Mendoza borrowed Php22,000
at 10% interest. Interest and principal were due on
September 6, 2002. What was the total amount
paid by her on that date?
Solution:
To find the interest due on September 6,2002, we
will first find the time between May 4,2002 and
September 6, 2002.
a. Approximate time;
Year Month Day

September 6, 2002 2002 9 6

May 4, 2002 2002 5 4
difference 4 2
Solution:
To find the interest due on September 6,2002, we
will first find the time between May 4,2002 and
September 6, 2002.
a. Approximate time; Year Month Day

This means 4 months September 6, 2002 2002 9 6

2 days. To find the May 4, 2002 2002 5 4

number of days: Difference: 4 2

(4x30days) + 2 days = 120 + 2 days = 122 days.

Then,
𝐷 122
𝐹 =𝑃 1+𝑟 = 22,000 1 + (0.10)
360 360
= 22,745.56
b. Exact date

Months Days (based in Calendar)

May (31 – 4) 27
June 30
July 31
August 31
September 6
Sum: 125 days
𝐷 125
𝐹 = 𝑃 1+𝑟 = 22,000 1 + (0.10)
360 360
= 22,763.89
Note: Since the given is May 4, then you need to subtract 4 days to the
31 days of May, so you will have 27. In addition, we will only have 6
days in September since the given end at September 6.
Example:
On May 4, 2002, Mrs. Mendoza borrowed Php22,000
at 10% interest. Interest and principal were due on
September 6, 2002. What was the total amount
paid by her on that date?
Solution:
b. Exact time:
Month Days in Table
September 6, 2002 249
May 4, 2002 124
Difference: 125 days

Therefore, the total amount paid by Mrs. Mendoza on September 6, 2002,

using exact time, we have Php22,763.89.
Leap year
In a leap year, if the time period includes the end
of February, every date after February 28 increases
its count by one.

Be careful when your calculations include a leap

year or a period that covers the end of a year.

Note: Any year that is evenly divisible by 4 is a

leap year: for example, 1988, 1992, and 1996 are
leap years
How many days between January 15 and May 28,
2024? (2024 is a leap year.)

January 15 is the 15th day of the year from Table.

May 28 is the 148th day of the year from Table.

However, since the time period includes February 29,
you must add one day to the value shown in the
table.

Therefore,
the exact number of days = (148 + 1) − 15 = 134.