4 5 6

0 GENERAL 2
1 MATHEMATICS 3
QUARTER 2

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MS. BERNADETTE B. LIPATA

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Today's Lesson

SIMPLE
INTEREST
0 By the end of this lesson, LEARNERS are able to...
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1 6
• Illustrate Simple Interest and Compound Interest;

2 • Computes interest, maturity value, future value, and

present value in simple interest environment; and
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• Solves problems involving simple interest.
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 DEFINITION OF TERMS
Lender or Creditor - person or institution who invests the money or
makes the funds available.
Borrower or debtor - person or institution who owes the money or
avails of the funds from the lender.
Origin or loan date - date on which money is received by the
borrower.
Repayment date or maturity date - date on which the money
borrowed or loan is to be completely repaid.
Time or term ( t) - amount of time in years the money is borrowed
or invested; length of time between the origin and maturity dates.
 DEFINITION OF TERMS
Principal ( P) - amount of money borrowed or invested on the origin
date.
Rate ( r) - annual rate, usually in percent, charged by the lender, or rate
of increase of the investment.
Interest ( I) - amount paid or earned for the use of money.
Simple Interest ( Is) - interest that is computed on the principal and then
added to it.
Compound Interest ( Ic) - interest is computed on the principal and
also on the accumulated past interests.
Maturity v alue or future v alue ( F) - amount after t years that the
lender receives from the borrower on the maturity date.
0Illustration of Simple and Compound 5
1 Interest
SCENARIO
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2 Supposed you won 10,000 pesos and you plan to
invest it for 5 years. A cooperative group offers 2%
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simple interesst rate per year. A bank offers 2%
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compounded annnually.

Which will you choose and why?

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0
Supposed you won 10,000 pesos and you plan to invest it for 5 years. A cooperative group
offers 2% simple interesst rate per year. A bank offers 2% compounded annnually.
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1
Which will you choose and why?

INVESTMENT 1: SIMPLE INTEREST 6

Interest Simple Interest Amount after t years

2
Time (t) Principal (P)

1
Rate (r)

2%
Solution
10,000(0.02)(1)
Answer
200
(Maturity Value)

10,000 + 200 = 10,200

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2 2% 10,000(0.02)(2) 400 10,000 + 400 = 10,400

3 3
4
10,000 2%
2%
10,000(0.02)(3)
10,000(0.02)(4)
600
800
10,000 + 600 = 10,600
10,000 + 800 = 10,800 8
5 2% 10,000(0.02)(5) 1,000 10,000 + 1,000 = 11,000
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0
Supposed you won 10,000 pesos and you plan to invest it for 5 years. A cooperative group
offers 2% simple interesst rate per year. A bank offers 2% compounded annnually.
5
1
Which will you choose and why?

INVESTMENT 1: COMPOUND INTEREST 6

Interest Compound Interest Amount after t years

2
Time (t) Principal (P)

1 10,000
Rate (r)

2%
Solution
10,000(0.02)(1)
Answer
200
(Maturity Value)

10,000 + 200 = 10,200

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2 10,200 2% 10,200(0.02)(1) 204 10,200 + 204 = 10,404

3 3 10,404 2% 10,404(0.02)(1) 208.08

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10,404 + 208.08 = 10,612.08

4 10,612.08 2% 10,612.08(0.02)(1) 212.24 10,612.08+212.24 = 10,824.32

5 10,824.32 2% 10,824.32(0.02)(5)
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216.49 10,824.32 + 216.49 = 11,040.81
0 5
Supposed you won 10,000 pesos and you plan to invest it for 5 years. A cooperative group
offers 2% simple interesst rate per year. A bank offers 2% compounded annnually.

1
Which will you choose and why?

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3 Simple interest remains throughout the investment term. In
compound interest, the interest from the previous year also earns
interest; thus, the interest grows every year.
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 SIMPLE INTEREST
Simple Interest (Is) is the interest charged on the principal alone for the
entire duration or period t of the loan or investment, at a partifuclar rate r .
After the term of the loan or investment, the maturity value or future value
F is computed by getting the sum of the principal and the interest due.
Formula:
Is = Prt
Where:
Is = simple interest
P = principal / present value / borrowed / amount invested
r = rate (%)
t = term or time, in years (note: if the time is in months, simply divide it by 12)
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Example #1 5
A bank offers 0.25% annual simple interest rate for a particular deposit.
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How much interest will be earned if 1 million pesos is deposited in this
savings account for 1 year?

2 Is = Prt 7
Given: Is = Prt

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r = 0.25% or 0.0025 Is = (1,000,000)(0.0025)(1)
3 P = 1,000,000 Is = 2,500
t = 1 year
Is = ?
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0
Try it! 5
A bank offers 2.5% annual simple interest rate for a particular deposit.
1
How much interest will be earned if 500,000 pesos is deposited in this
savings account for 1 year? 6
2 Is = Prt 7
Given:

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r = 2.5% or 0.025
3 P = 500,000
t = 1 year
Is = ?
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Example #2 5
How much interest is charged when 50,000 pesos is borrowed for 9
1
months at an annual simple interest rate of 10%?
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2 Is = Prt 7
Given: Is = Prt
Is = ?

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Is = (50,000)(0.1)(0.75)
3 P = 50,000 Is = 3,750
t = 9 months ÷ 12 months
or 0.75 years
r = 10% or 0.1
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0
Let’s Try! 5
How much interest is charged when 30,000 pesos is borrowed for 7
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months at an annual simple interest rate of 6%?
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2 Is = Prt 7
Given:
Is = ?
3 P = 30,000
t = 7 months ÷ 12 months
or 0.58 years
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r = 6% or 0.06
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Finding the Principal Amount
Example #3 :
When invested at an annual interest rate of 7%, an amount earned
11,200 pesos of simple interest in two years. How much money was
originally invested?
�� � = F − ��
�=
��

Given: P= 11,200
P=? (0.07)(2)
r = 7% or 0.07 P= 11,200
t =2 0.14
Is = 11,200 P= 80,000
Finding the Principal Amount
LET’S TRY !
When invested at an annual interest rate of 2%, an amount earned
1,200 pesos of simple interest in 1 year. How much money was
originally invested?
��
�=
��

Given:
P=?
r = 2% or 0.02
t=1
Is = 1,200
Finding the Rate ( r)
Example #4
If an entrepreneur applies for a loan amounting to 500,000 pesos in a
bank, the simple interest of which is P157,500 for 3 years, what interest
rate is being charged?
��
�=
��

Given: r= 157,500__
r=? (500,000)(3)
P = 500,000 r = 157,500__
t=3 1,500,000
Is = 157,500 r = 0.105 or 10.5%
Finding the Rate ( r)
Let’s Try!
Mary Rose invested an amount of 60,000 pesos in a bank, which
earned a simple interest of 1,200 for 1 year, what is the interest rate?

��
�=
��

Given:
r=?
P = 60,000
t=1
Is = 1,200
Finding the Time ( t)
Example #5
How long will a principal earn an interest equal to half of it at 5%
simple interest?
��
�=
��

Given: t= 0.5P_
t=? P(0.05)
P=P t = 0.5P_ = 0.5P = 0.5
r = 5% or 0.05 P(0.05) 0.05P 0.05
�
Is = � or 0.5P t = 10 years
�
Finding the Time ( t)
LET’S TRY !
Given: P = 40,000; Is = 700; r = 7%. Find time (t).

��
�=
��

Given:
t=?
P = 40,000
r = 7% or 0.07
Is = 700
 MATURITY ( FUTURE) VALUE
Maturity (future) value is the amount after t years that the lender receives
from the borrower on the maturity date.
Formula:
� = �(1 + ��) � = � + �� � = � + ���

Where:
F = future value
Is = simple interest
P = principal / present value / borrowed / amount invested
r = rate (%)
t = term or time, in years (note: if the time is in months, simply divide it by 12)
0
Example #1 5
Find the maturity value if 1 million pesos is deposited in a bank at an
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annual simple interest rate of 0.25% after (a) 1 year and (b) 5 years?
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2 F = P( 1 + rt) | F = P + Is | F = P + Prt
Given: F = P(1 + rt)
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P = 1,000,000 F = 1,000,000 (1 + (0.0025)(1))
3 r = 0.25% or 0.0025 F = 1,000,000 (1 + 0.0025)
a.) t = 1 year F = 1,000,000 (1.0025)
F=? F = 1,002,500
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0
Example #1 5
Find the maturity value if 1 million pesos is deposited in a bank at an
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annual simple interest rate of 0.25% after (a) 1 year and (b) 5 years?
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2 F = P( 1 + rt) | F = P + Is | F = P + Prt
Given: F = P(1 + rt)
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P = 1,000,000 F = 1,000,000 (1 + (0.0025)(5))
3 r = 0.25% or 0.0025 F = 1,000,000 (1 + 0.0125)
b.) t = 5 years F = 1,000,000 (1.0125)
F=? F = 1,012,500
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0
Try it! 5
Given: P = 15,000 ; t = 4 months ; and r = 2%. Find maturity (future) value
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(F).
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2 F = P( 1 + rt) | F = P + Is | F = P + Prt 7
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BRAINCELLS
CHECK!!!
Written Work #1 (Pair Activity)
1. What is the formula of computing the simple interest on a
given financial transaction?
2. Gina deposited 30,000 in a bank that pays 2.5% simple
interest. How much will be her money after 6 years?
3. At what simple interest rate will an amount of money
double itself in 10 years?
4. How much was the interest if Sophia borrowed P45,000
and paid a total of P55,500 at the end of the term?
5. Justine borrowed P5,000 at 5% annual simple interest
rate. If he decided to pay after 1 year and 3 months, how
much should he pay by then?
Written Work #1 (Pair Activity)
Complete the table below by finding the unknown.

Principal Rate Time Interest Maturity Value

₱45,000 2% 2.5 years (6) (7)
(8) 1.2% 4 years ₱4,560 (9)
₱105,000 3% (10) (11) ₱114,450
₱60,000 5% 3 years (12) (13)
(14) 1½% 2 years ₱1,200 (15)
 You did great!

See you next time :)

QUESTIONS?