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Consumer Mathematics PART 1 LESSON 5

Here are the steps to solve these compound interest problems: 1) P = P12,000, r = 5%, t = 3 years Interest = Prt = P12,000(0.05)(3) = P7,200 Total = P12,000 + P7,200 = P19,200 2) Given: Principal (P) = P16,500 Interest (I) = P1,620 Time (t) = 1.5 years Find rate (r) I = Prt P1,620 = P16,500r(1.5) r = P1,620/P16,500(1.5) = 0

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70 views24 pages

Consumer Mathematics PART 1 LESSON 5

Here are the steps to solve these compound interest problems: 1) P = P12,000, r = 5%, t = 3 years Interest = Prt = P12,000(0.05)(3) = P7,200 Total = P12,000 + P7,200 = P19,200 2) Given: Principal (P) = P16,500 Interest (I) = P1,620 Time (t) = 1.5 years Find rate (r) I = Prt P1,620 = P16,500r(1.5) r = P1,620/P16,500(1.5) = 0

Uploaded by

Althea Noelfei Quisagan
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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Consumer Mathematics

(Essential Mathematics for the Modern


World)

Investing
Objectives:
1. Effectively apply concepts associated with investments
2. Describe Savings, Interest, Investment.
3. Differentiate simple and compound interest.
4. Identify some types of Financial Investments.
Introduction
Consumers purchased goods, and services for
personal use. Consumer consumes commodities,
products, information and data. The process involves
the use of money to enable and fuel consumption.
Consumer mathematics provide us with practical ideas
and tools used in activities like saving money, paying
debts, managing data, and buying products.
Where does
money come
from?

One things for


sure, it doesn’t
grow on trees!
Even though we
wish it did.
How money is pri
nted
CHOOSE YOUR ANSWER
Suppose you had P 5 400 in a savings account and the interest rate was
2% per year. After 5 years, how much do you think you would have in
the account if you left the money to grow?
• More than P 5 616
• Exactly P 5 616
• Less than P 5 616
• Do not know
• Refuse to answer
CHOOSE YOUR ANSWER
Imagine that the interest rate on your savings account was 1% per year
and inflation was 2% per year. After 1 year, how much would you be
able to buy with the money in this account?
• More than today
• Exactly the same
• Less than today
• Do not know
• Refuse to answer
CHOOSE YOUR ANSWER
Tell whether this statement is true or false. “Buying a single company’s
stock usually provides a safer return than a stock mutual fund.”
• True
• False
• Do not know
• Refuse to answer
ANSWERS
FIRST More than P 5 616

SECOND Less than today

THIRD False
What is investing?
Investing is the act of committing money or
capital to an endeavor with the expectation of
obtaining an additional income or profit.

In other words, making money off the


money you already have!
What is savings?

Savings is the money a person has


left over after spending from their 
disposable income over a given time
period.
Savings can be used to increase
income through investing.
Basic Savings Account
• Keeping your money “in the bank”
• Often limits the number of
deposits and withdraws per month
• Need to keep a minimum amount
• Earns interest
• Insured by the government
through PDIC
How do savings account earns?
1. Open savings account in a bank and deposit money.
2. The bank pays you interest for allowing the bank in using
your money.
3. The bank lend the money to borrowers for higher
interest rate.
4. Then the bank set a side lower interest rate from the
depositor.
5. The difference explains how banks stay in business.
Two types of Interest
Simple Interest is a fixed amount earned over a period of time.
I = Prt
I = interest
P= Principal Amount
r = rate of interest per annum
t= time in years
Face Amount (F) is the value of your account after t years.
F=P+I
= P(1 + rt)
Sample Problem on Simple Interest
Trump Banked P 280,000 that gives him
a 0.75% interest. If he leaves the money
in the bank for an entire year, how much
interest would he gained? What if he
withdraw the money in 90 days, how
much would be his interest? What is the
face amount of his account after 5 years?
Sample Problem on Simple Interest
A. How much interest would he gained
after a year?
P = 280, 000 r = 0.75% t = 1 I = ?

I = Prt = (280000)(0.0075)(1) = 2100


He will gain P2,100 in a year.
Sample Problem on Simple Interest
B. What if he withdraw the money in 90
days, how much would be the interest?
P = 280, 000 r = 0.75% t = I = ?

I = (280000)(0.0075)() = 517.81
He only gets P517.81
Sample Problem on Simple Interest
B. What is the face amount of his account after 5
years?
P = 280000 r = 0.75% t = 5
F = P(1 + rt) = 280000(1+{(0.0075)(5)})
= 280000 ( 1 + 0.0375)
= 280000 ( 1.0375)
= 290, 500
The value of his account after 5 years is P290, 500.
Two types of Interest
Compound Interest is an amount earned over a period of time including interest of the
interest of your money.
F=P(1+
F = Face Value
r = rate of interest per annum
t = number of years
m = number of times interest is computed per year or compounding times
daily = 365
Monthly = 12
Quarterly = 4
Semi-Annually = 2
Annually = 1
Sample Problem on Compound Interest
Trump Banked P 280,000 that gives him a
0.75% interest. If he leaves the money for a
year and compounded daily, what is its
account value after a year? If it compounded
quarterly, what is its account value after a
year? Supposedly, Trump leaves the money for
5 years compounding quarterly, How much is
his total earnings?
Sample Problem on Compound Interest
A. If he leaves the money for a year and compounded daily, what
is its account value after a year?
P = 280000 r = 0.75% m= 365 t=1
F=P(1+
=280000(1 +
=280000(1+ 0.000020547
=280000(1.000020547
= 280000(1.007528118)
= 282,107.87
The account value in a year is P282,107.87
Sample Problem on Compound Interest
B. If it compounded quarterly, what is its account value after a
year?
P = 280000 r = 0.75% m= 4 t=1
F=P(1+
=280000(1 +
=280000(1+ 0.001875
=280000(1.001875
= 280000(1.00752112)
= 282,105.91
The account value is P282, 105. 91
Sample Problem on Compound Interest
C. Supposedly, Trump leaves the money for 5 years compounding
quarterly, How much is his total earnings?
P = 280000 r = 0.75% m= 4 t=5
F=P(1+
=280000(1 +
=280000(1+ 0.001875
=280000(1.001875
= 280000(1.038175544)
= 290,689.15
The account value is P290,689.15
Evaluation
Basic Savings Account
1. Find the interest earned after 3 years if P12,000 is deposited in a savings
account which earns 5% simple interest.
2. At what simple interest rate is P16,500 invested if it earns an interest of
P1620 just after 1.5 years?
3. What is the maturity value of a P75,000 in a three year investment earning
5% interest compounded monthly?
4. Find the compound amount after 5 years and 9 months if the principal is
P150,000 and the interest rate is 7% compounded annually

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