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Simple Interest

The document discusses simple interest, which is interest charged on a loan as a percentage of the principal amount for the period of time the money is borrowed. Simple interest is calculated using the formula I=Prt, where I is interest, P is principal, r is the interest rate, and t is time. Several examples are provided to demonstrate calculating simple interest on loans of different principal amounts, rates, and time periods. The total repayable amount is the principal plus any interest accrued.

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Bernadette Araño
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60 views15 pages

Simple Interest

The document discusses simple interest, which is interest charged on a loan as a percentage of the principal amount for the period of time the money is borrowed. Simple interest is calculated using the formula I=Prt, where I is interest, P is principal, r is the interest rate, and t is time. Several examples are provided to demonstrate calculating simple interest on loans of different principal amounts, rates, and time periods. The total repayable amount is the principal plus any interest accrued.

Uploaded by

Bernadette Araño
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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SIMPLE INTEREST

INTEREST

▪ In a world of business, an investor who places


capital in a productive enterprise expects not
only the eventual return of his capital, but also
additional payment.
▪ An individual who lends his capital expects the
debtor to pay back not only the m0ney originally
but also additional payment.
▪ This additional payment is what we called
INTEREST
INTEREST

▪ It is the compensation that a borrower of


capital pays to a lender of capital for its use.
▪ is the monetary charge for the privilege of
borrowing money.
▪ It also refer to the amount of ownership a
stockholder has in a company.
SIMPLE INTEREST
▪ The interest due at the end of the time.
▪ The simple interest on a principal is proportional to the time is invested.
▪ In formula:
I= Prt
where I = interest
P= principal (in pesos)
r = interest rate per period of time (expressed as percent or a fraction)
t = time (in years) between the date the loan is made and the date it
matures or becomes repayable to the lender.
SIMPLE INTEREST
▪ The maturity value, F, the total amount the borrower
would need to pay back, is given by the formula
F=P+I
Also ,

F = P + Prt, leading to
F = P(1 + rt)
SIMPLE INTEREST

▪ Interest is charged as a percent of the


principal for a definite period of time.
▪ Rates are stated in terms of one year unless
otherwise specified.
▪ A stated rate 12% means 12% of the
principal for one year.
EXAMPLE PROBLEM # 1

▪ Find the interest rate on a loan of P1, 000 for


one year if the interest rate is 12%.
EXAMPLE PROBLEM #1

▪ Find the interest rate on a loan of P1, 000 for one year if the
interest rate is 12%.
▪ Solution:
P = 1,000
R = 12%
t = 1 year

I = Prt
= 1,000(0.12)(1)
= 120 pesos
EXAMPLE PROBLEM # 2

▪ A credit union has issued a 3- year loan of


P50, 000 at a rate of 10%, what amount will
be repaid at the end of the third year?
EXAMPLE PROBLEM #2

▪ A credit union has issued a 3- year loan of P50, 000 at a rate of


10%, what amount will be repaid at the end of the third year?
▪ Solution:
P = 50,000
R = 10%
t = 3 year The amount to be repaid is the principal
plus the interest.
I = Prt F=P+I
= 50,000(0.10)(3) F = P50,000 + 15,000
I = 15, 000 pesos F = 65, 000 pesos
EXAMPLE PROBLEM
▪ A credit union has issued a 3- year loan of P50, 000 at a rate of 10%, what amount will be
repaid at the end of the third year?
▪ Solution #2
Since the problem is asking for the amount, we can go immediately to solving for F and n0t
anymore solving for I.
P = 50,000, r = 10%, t = 3 years, we have
F = P(1 + rt)
= [50,000 (1 + (0.10)(3)]
= [ 50,000 (1 +0 .30)]
= 50,000 (1.30)
= 65, 000
EXAMPLE PROBLEM # 3

▪ A 5,000 savings account earned P700 interest in 2


years. What was the rate of the given interest given?
P = 5,000 I = 700 t = 2 years
EXAMPLE PROBLEM # 3

▪ A 5,000 savings account earned P700 interest in 2


▪  

years. What was the rate of the given interest given?


P = 5,000 I = 700t = 2 years
From I = prt, we have
r=
=
EXAMPLE PROBLEM # 4

▪ Find the interest on a loan of 5,000 at 18% simple


interest, which was paid after 6 months.
EXAMPLE PROBLEM # 4

▪ Find the interest on a loan of 5,000 at 18% simple interest, which


was paid after 6 months.
▪ Solution:
P = 5,000 r = 18% t = 6/12 year = ½ year
I = Prt
= (5000)(0.18)(1/2)
I = 450 pesos

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