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FM Simple

The document discusses simple interest calculations. It provides examples of calculating simple interest given the principal amount, interest rate, and time period. It also shows how to calculate total amount/maturity value. Reminders are provided on using ordinary vs exact time periods and the differences in calculating interest annually vs monthly. Worked examples are included to demonstrate simple interest calculations in various scenarios.

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Francine Parrocha
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
63 views

FM Simple

The document discusses simple interest calculations. It provides examples of calculating simple interest given the principal amount, interest rate, and time period. It also shows how to calculate total amount/maturity value. Reminders are provided on using ordinary vs exact time periods and the differences in calculating interest annually vs monthly. Worked examples are included to demonstrate simple interest calculations in various scenarios.

Uploaded by

Francine Parrocha
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FINANCIAL MANAGEMENT

SIMPLE INTEREST:

Principal Amount, P - amount deposited in a bank or borrowed from a bank


Interest rate, r - percent used to determine the amount of interest (converted to decimal
by dividing by 100)
Simple Interest, I – interest paid on the original principal
Time, t - is expressed in the same period as the rate
Total Amount, A – Total amount of principal and interest earned

I = Prt;
A = P + I; A = P(1+rt)
FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the simple interest earned in 1 year on a deposit of P10,000 if the interest rate is
5%.

Given: P = 10000, r = 5/100 = 0.05, t = 1


Required: I

Answer: The simple interest earned is P500


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the simple interest due on a three-month loan of P200,000 if the interest rate is
6.5%.

Given: P = 200000, r = 0.065, t = 3/12 (t is expressed same period as the rate)


Required: I

Answer: The simple interest earned is P3,250


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the simple interest due on a two-month loan of P50,000 if the interest rate is
1.5% per month.

Given: P = 50000, r = 0.015, t = 2 (t is expressed same period as the rate)


Required: I

Answer: The simple interest earned is P1,500


REMINDERS:

• Ordinary time/method has 360 days in a year; 30days in a month


• Exact time/method has 365 days in a year or 366days in a leap year;
(Jan, March, May, July, Aug, Oct, and Dec have 31days), (Feb has
28days or 29days for leap years), (the rest has 30days per month)

• We will used ORDINARY TIME unless stated in the problem


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the simple interest due on a 45-day loan of P35,000 if the annual interest rate is
8%.

Given: P = 35,000, r = 0.08, t = 45/360 (t is expressed same period as the rate; ordinary
time)
Required: I

Answer: The simple interest earned is P350


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

The simple interest charged on a six-month loan of P30,000 is P1,500. Find the simple
interest rate.

Given: P = 30000, I = 1500, t = 6/12 (t is expressed same period as the rate;)


Required: r (in percent)

Answer: The interest rate is 10% annually


FINANCIAL MANAGEMENT
SIMPLE INTEREST:
W
RO
The simple interest charged on a six-month loan of P30,000 is P1,500. Find the simple
interest rate.

Given: P = 30000, I = 1500, t = 6 (t is expressed same period as the rate;)

NG
Required: r (in percent)

Answer: The interest rate is 1% monthly


REMINDERS:

• Slide 7 and 8 have the same problem/given but different answers


depending on the approached
• Since the period of rate was not mentioned, the rate must be
computed annually and not monthly
• Slide7 is the final answer and not Slide 8
REMINDERS:

• A – total amount is the same as Future Value or Maturity Value

• Future Value is used in investment, while;


• Maturity Value is used in loan
FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the maturity value of a simple interest, eight-month loan of P8,000 if the interest
rate is 9.75%.

Given: P = 8000, r = 0.0975, t = 8/12 (t is expressed same period as the rate;)


Required: A

Answer: The maturity value of a loan is P8,520


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the maturity value of a simple interest, eight-month loan of P8,000 if the interest
rate is 9.75%.

Given: P = 8000, r = 0.0975, t = 8/12 (t is expressed same period as the rate;)


Required: A

Answer: The maturity value of a loan is P8,520


REMINDERS:

• Slides 11 and 12 have the same problem/given and answer (with


different approached)
• BOTH are correct
FINANCIAL MANAGEMENT
SIMPLE INTEREST:

The maturity value of a three-month loan of P4,000 is P4,085. What is the simple interest
rate?

Given: A = 4085, P = 4000, t = 3/12 (t is expressed same period as the rate;)


Required: r

Answer: The interest rate is 8.5%


FINANCIAL MANAGEMENT
SIMPLE INTEREST:

Calculate the simple interest due on a P5,000 loan made on September 20 and repaid on
December 9 of the same year. The interest rate is 6%

Given: P = 5000, r = 0.06, t = (10+30+30+9)/360 (ordinary time-30 days per month)


Required: r

Answer: The simple interest is P65.83


FINANCIAL MANAGEMENT
SIMPLE INTEREST:
W
RO
Calculate the simple interest due on a P5,000 loan made on September 20 and repaid on
December 9 of the same year. The interest rate is 6%

Given: P = 5000, r = 0.06, t = (10+31+30+9)/360 (exact time-number of days varies per

NG
month)
Required: r

Answer: The simple interest is P66.67


REMINDERS:

• Slides 15 and 16 have the same problem/given but different answer


due to time (ordinary or exact)

• We will used ORDINARY TIME unless stated in the problem


FINANCIAL MANAGEMENT
SIMPLE INTEREST: (use exact method)
1. Find the due date on a 180-day loan made on March 10.
2. Find the due date on a 90-day loan made on June 25.
3. Find the number of days from April 22 to November 8 of the same year.
4. Find the number of days from February 1 to July 1 during a leap year.
5. Find the number of days from December 18 to February 8 of the following year.
6. Calculate the simple interest due on a P7500 loan made on January 30 and repaid on
July 18 of the same year. The interest rate is 6.5%. The year is not a leap year.
7. Calculate the simple interest due on a P6000 loan made on May 18 and repaid on
October 20 of the same year. The interest rate is 5.75%.
8. A P12,000 loan is made on February 21 of a leap year. The interest rate is 6.25%. The
loan is repaid on November 15 of the same year. Calculate the simple interest paid on
the loan.
9. A P15,000 loan is made on August 28. The interest rate is 7%. The loan is repaid on
January 20 of the following year. Calculate the simple interest due on the loan.
FINANCIAL MANAGEMENT
SIMPLE INTEREST: (use exact method)
1. Find the due date on a 180-day loan made on March 10. (Sep6)
2. Find the due date on a 90-day loan made on June 25. (Sep 23)
3. Find the number of days from April 22 to November 8 of the same year. (200days)
4. Find the number of days from February 1 to July 1 during a leap year. (151days)
5. Find the number of days from December 18 to February 8 of the following year. (52days)
6. Calculate the simple interest due on a P7,500 loan made on January 30 and repaid on
July 18 of the same year. The interest rate is 6.5%. The year is not a leap year. (P225.72)
7. Calculate the simple interest due on a P6000 loan made on May 18 and repaid on
October 20 of the same year. The interest rate is 5.75%. (P146.51)
8. A P12,000 loan is made on February 21 of a leap year. The interest rate is 6.25%. The loan
is repaid on November 15 of the same year. Calculate the simple interest paid on the
loan. (P549.18)
9. A P15,000 loan is made on August 28. The interest rate is 7%. The loan is repaid on
January 20 of the following year. Calculate the simple interest due on the loan. (P417.12)

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