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Simple-Interest

The document provides a comprehensive overview of simple interest, including its calculation, applications in loans and investments, and examples of various scenarios. It outlines the formula for simple interest (I = PRT) and discusses maturity value and different interest calculation methods based on 360-day and 365-day years. Additionally, it includes exercises and examples for calculating interest, maturity values, and present values in practical situations.

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26 views30 pages

Simple-Interest

The document provides a comprehensive overview of simple interest, including its calculation, applications in loans and investments, and examples of various scenarios. It outlines the formula for simple interest (I = PRT) and discusses maturity value and different interest calculation methods based on 360-day and 365-day years. Additionally, it includes exercises and examples for calculating interest, maturity values, and present values in practical situations.

Uploaded by

bustosjrernesto
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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Lesson

SIMPLE
INTEREST
Applications

LOANS, RETURN ON AN
INVESTMENT, AND DURATION AT
AN INVESTMENT
Getting ready
A. EXPRESS EACH AS A DECIMAL
1. 12%
2. 3%
3. 3 ½%
4. 10.5%
5. 200%
6. 0.75%
1. What percent of 24 is 12?
2. What is 25% of 108?
3. 48 is what percent of 60?
Simple Interest
IS CHARGED ONLY ON THE LOAN AMOUNT CALLED
THE PRINCIPAL. THUS, INTEREST ON THE
INTEREST PREVIOUSLY EARN IS NOT INCLUDED.
SIMPLE INTEREST IS CALCULATED BY MULTIPLYING
THE PRINCIPAL BY THE RATE OF INTEREST BY THE
NUMBER OF PAYMENT PERIODS IN A YEAR.
Simple interest
I = PRT
WHERE I = INTEREST, P = PRINCIPAL,
R = RATE OF INTEREST, AND T = TIME OR
TERM IN YEARS OR FRACTION OF A YEAR.
Maturity value or
(Amount of Balance)
A = P + I, A = P + PRT, OR A = P(I + RT)

A = MATURITY VALUE, P = PRINCIPAL,


I = INTEREST
Example 1
TERESA BORROWED P120,000.00 FROM
HER UNCLE. IF TERESA AGREED TO PAY
AN 8% ANNUAL INTEREST RATE,
CALCULATE THE AMOUNT OF INTEREST
SHE MUST PAY IF THE LOAN PERIOD IS
(A) 1 YEAR, (B) 9 MONTHS, AND © 18
MONTHS.
Example 2
TO BUY THE SCHOOL SUPPLIES FOR THE
COMING SCHOOL YEAR, YOU GET A SUMMER JOB
AT A RESORT. SUPPOSE YOU SAVE P4,200.00 OF
YOUR SALARY AND DEPOSIT IT INTO AN
ACCOUNT THAT EARNS SIMPLE INTEREST. AFTER
9 MONTHS, THE BALANCE IS P4,263.00. WHAT IS
THE ANNUAL INTEREST RATE?
Example 3
IF P10,000.00 IS INVESTED AT
4.5% SIMPLE INTEREST, HOW
LONG WILL IT TAKE TO GROW
TO P11,800.00?
Example 4
A LOAN INSTITUTION CHARGES 12% SIMPLE
INTEREST FOR A 3-YEAR, P60,000.00 LOAN.

a. FIND THE TOTAL INTEREST ON THE LOAN.


b. FIND THE TOTAL AMOUNT THAT MUST BE PAID
TO THE LOAN INSTITUTION AT THE END OF 3
YEARS.
Example 5
FIND THE MATURITY VALUE OF THE
FOLLOWING LOAN AMOUNTS:

a. P50,000 BORROWED AT 9% FOR 2 YEARS.


b. P120,000 BORROWED AT 10% FOR 8
MONTHS.
Example 6

FIND THE PRESENT VALUE OF P86,000.00


AT 8% SIMPLE INTEREST FOR 3 YEARS.
Example 7
FIND:
(a) 90 DAYS FROM SEPTEMBER 8, 2014
(b) THE NUMBER OF DAYS BETWEEN
FEBRUARY 8, 2015 AND OCTOBER
8, 2015
Ordinary Interest or
banker’s Interest – interest
based on a 360-day year.

Exact interest – interest


based on a 365-day year.
Example 8

YOU GET A 180-DAY P200,000.00


LOAN FROM A BANK AT A 10.5%
INTEREST. CALCULATE INTEREST
USING (A) 360-DAY AND (B) 365-
DAY YEAR.
Example 9
A LOAN OF P200,000.00 WAS MADE FROM A BANK
THAT CHARGES 9% INTEREST RATE AND SHOULD
BE REPAID AFTER 90 DAYS. IF PAYMENT OF
P80,000.00 WAS MADE AFTER 20 DAYS AND THE
BALANCE ON THE 90TH DAY, CALCULATE THE
AMOUNT OF INTEREST, PRINCIPAL PAID FOR EACH
PAYMENT, AND THE TOTAL AMOUNT PAID.
I. Complete the table by finding the
simple interest.
Principal Interest Time (t) Amount of
(P) Rate (r) Interest
(I)
1. P72500 8% 3 yr.
2. P3000 12% 6 mo.
3. P48200 11% 2 ½ yr.
4. P161500 10 4/5% 4 yr.
II. Complete the table by finding the
maturity value.
Principal Interest Time (t) Maturity
(P) Rate (r) value
6. P35600 6% 9 mo.
7. P140250 10% 15 mo.
8. 75800 8 ½% 2 yr.
9. 140200 11% 6 yr.
10. 9% 10 yr.
III. Answer each of the
following
11. Find:

A. 50 DAYS FROM MARCH 11, 2014


B. 150 DAYS FROM DECEMBER 7,
2016
C. 200 DAYS FROM APRIL 20, 2015
12. Find the number of days
between each set of dates:
a.JUNE 12 TO SEPTEMBER 27
b.AUGUST 8 TO DECEMBER 13
c. JANUARY 10, 2012 TO MAY 11,
2012
13. Find the ordinary and
exact interest on P10800.00
for 5 days at 8% simple
interest.
14. Carmen invested P50000.00
at 10 ½% simple interest for
120 days. Find the ordinary
interest and amount at the end
of the term.
15. Find the amount due if
P120000.00 was invested at
10% for 160 days using:
a.ORDINARY INTEREST
b.EXACT INTEREST
16. Irene invested P25000.00 at 16%
simple interest for 6 years.
a. HOW MUCH INTEREST WILL BE
EARNED?
b. WHAT IS THE FUTURE VALUE OF THE
INVESTMENT AT THE END OF 6
YEARS?
17. Jun is investing an amount
at 15% simple interest for 3
years. If he intends to have
P48200.00 at the end of the
term, what must be his
principal?
18. If Tina wants to earn 10%
annual simple interest on an
investment, how much
should she invest to have
P30000.00 in 9 months?
19. Ana borrows P20000.00
from her uncle and agrees to
pay him P22000.00 in 15
months. What interest rate
was she paying?
20. Toni decides to pay off a 12%
interest P25000.00 loan ahead of
time. The lending institution tells her
that she owes P986.31 interest. If
the lending institutions uses a 365-
day year, for how many days are
you being charged interest?

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