Simple Interest and Simple Discount

General Mathematics
 Simple Interest
• Simple interest is a quick and easy method of calculating the interest charge on a
loan. Simple interest is determined by multiplying the daily interest rate by the
principal by the number of days that elapse between payments.
• Simple interest can be computed using the formula:

Where:
Example 1

• A bank offers 2.5% simple interest rate for a particular deposit. How much interest
will be earned if P 1,250,000 is deposited in this savings account for 2 years?

Given: Solution:

𝐼 𝑠 =62,500

Answer: P62,500
Example 2

• How much interest is charged when P 50, 000 is borrowed for 9 months at simple
interest rate of 10%?

Given: Solution:

𝐼 𝑠 =3,750

Answer: P3,750
Future Value/Maturity Value
• Amount after t years that the lender receives from the borrower on the maturity
date.
• Future Value or Maturity Value can be computed using the formula:

Where: Where:
Example 3

• Charlotte invested 20,550 pesos in a bank that gives 14.5% interest. How much
will her money be at the end of 5 years and 2 months?

Given: Solution:
)

𝐹 =35,945.38

Answer: P35,945.38
 Example 4
• Mr. Bean borrowed 23, 400 pesos for his lemonade stand business. If the money
has a simple interest of 9.75%, how much money will be needed to repay his debt
after 7 months?

Given: Solution:

𝐹 =24,730.88
Answer: P24,730.88
Principal/Present Value
• Amount of money borrowed or invested on the origin date.
• Principal or Present value can be computed using:

Where: Where:
Example 5

• Rancho earned 7, 000 pesos for 2 years and 7 months at 8 simple interest. How
much money did he invest?

Given: Solution:

𝑃=32258.06
Answer: P32,258.06
Example 6

• An 8, 750 pesos was repaid by Andrea after 11 months. If the money she borrowed
has an interest of 3.12%, then how much money did she borrowed?

Given: Solution:

𝑃=8,506.71
Answer: P8,506.71
Simple interest rate (r)

• Annual rate, usually in percent, charged by the lender, or rate of increase in the
investment.
• Simple interest rate can be computed using

Where: Where:
Example 7

• At what simple interest rate will P5, 800 increase to P20, 000 in 10 years?

Given: Solution:

𝑟 =0.2448∨24.48 %

Answer:
Example 8

• Jun issues a check for P4,950 to settle a 4-month loan of P4,500. How much
simple interest was he charged?

Given: Solution:

𝑟 =0.3 𝑜𝑟 30 %
Answer:
Time or term
• Amount of time in years the money is borrowed or invested; length of time
between the origin and maturity dates.
• Time or term can be computed using:

Where: Where:
Example 9
• In how much time will P28, 000 amount to P29, 134 at 16.2% simple interest rate?

Given: Solution:

𝑡 =0.25
Answer: 0.25 yr
Example 10

• When will P700 accumulate to P1, 200 if the rate at which it is invested is 10%
simple interest?

Given: Solution:

𝑡 =7.14
Answer: 7.14 yrs
 Simple Discount

• In the Simple discount situation, there is an amount of money (future value) due
on a certain future date, usually within a year; the debtor can ask for paying in
advance and, if the creditor agrees with him, the money to be paid today
(present value) is less than the due capital
• Simple Discount can be computed using:

Where:
Example 11

• Tito borrows P1, 000 from the Social Security System for a term of one year. The
interest charged is 5% discount interest rate. Find the discount of the P1, 000 note
that Tito signs.

Given: Solution:

𝐷=50
Answer: P50
Example 12

• A maturity value of P6000 is to be discounted at discount interest rate of 8% for

Given: Solution:

𝐷=200
Answer: P200
Proceeds

• Amount to be received after discounted

Where: Where:
 Example 13

• Tito borrows P1, 000 from the Social Security System for a term of one year. The
interest charged is 5% discount interest rate. What is the proceeds of the P1, 000
note that Tito signs.

Given: Solution:

𝑃=950
Answer: P950
Example 14

• Discount P6000 for 150 days at a discount interest rate of 8%.

Given: Solution:

𝑃=5800
Answer: P5800
Future Value or Maturity Value (Discount)

• Future Value or Maturity Value of a Discount can be computed using:

Given:
Example 15

• A 6.14% discount rate was made in an amount for 136 days. Find the amount if the
proceed is 6, 200 pesos.

Given: Solution:

𝐹 =6347.23
Answer: P6347.23
Example 16

• The proceed of a given amount is P7, 250. If the amount is discounted at 5.17% for
3 months, how much is the amount?

Given: Solution:

Answer: P7344.93
Discount Rate

• Discount Rate can be computed using:

Where: Where:
Example 17

• The maturity value of P12, 500 was given a discount for 155 days. What is the
discount rate if the proceed is P11, 200?

Given: Solution:

𝑑=0.2415 𝑜𝑟 24.15 %
Answer: 24.15%
Example 18

• The discount interest of P15, 200 is P1, 230. Find the discount rate if money is
discounted for 133 days.

Given: Solution:

Answer: 21.90% 𝑑=0.219 𝑜𝑟 21.90 %

• Time in simple discount can be computed using:

Where: Where:
Example 19

• How long will it take to have a discount of 1, 550 pesos with a discount rate of
12.2%, if it has an amount of 17, 500 pesos?

Given:F = 17, 500 Solution:

𝑡 =0.73
Answer: 0.73 yr
Example 20

• When will P8, 000 have a discount of P450, if it has a rate of 5.13%?

Given:F = 8,000 Solution:

Answer: 1.1 yrs