Simple Interest

MATH OF INVESTMENT
AARON PAUL A. CASABAR

Lesson Objectives
Define simple interest
Illustrate simple interest
Compute interest, maturity value,
future value, and present value in
simple interest environment
Solve problems involving simple
interest.
What are some
way to take
care of hard-
earned money ?
Buy only what you needs
What are some
way to take
care of hard-
earned money ?
What are some
way to take
care of hard-
earned money ?
Try to save some money

What are some
way to take
care of hard-
earned money ?
Invest some money

What are some
way to take
care of hard-
earned money ?
Think of the future

Converting Percent to Decimal
To convert a percent to decimal,
drop the percent sign and move the
decimal point two places to the left.
𝟏 .¿ 𝟏𝟐% =𝟎 . 𝟏𝟐 44 𝟎.𝟎𝟎𝟓
2
3
𝟎.𝟎𝟑𝟏𝟐.%
𝟎.𝟏𝟎𝟓
5 𝟐
Percent Problem
Formula: P
is the portion/percentage R B
is the rate
is the base(total amount)
Example:
rate base portion
Percent Problem
Formula:
is the portion P
is the rate R B
Price of the bag discount Discount price
10 % 50
₱ 500 ?
Base Rate Portion
Percent Problem
Formula:
is the portion P
is the rate R B
Price of the shoes discount Discount price
1 6? % 240
₱ 1500
Base Rate Portion
Percent Problem
Formula:
is the portion P
is the rate R B
Price of the book discounted Discount price
? 3 0 % 225
₱ 750
Base Rate Portion
Percent Problem
Formula:
is the portion P
is the rate R B
1of 𝟏𝟖𝟕𝟓
2 𝟎.𝟏𝟓 𝒐𝒓 𝟏𝟓 %
3is of what number 𝟗𝟖𝟓
4of is 𝟏𝟎𝟏𝟓
5is 25 of what number 𝟗𝟎
 Principal () - the original sum of money
borrowed in a loan, or put into an
investment.
 Interest () - the money paid for the use of
money
 Rate of interest ()- annual rate, usually in percent, charged by
the lender, or rate of increase of the investment.
 Time – amount of time in years the money is borrowed or

invested.
Formula:
𝐼=𝑃𝑟𝑡
(a) (b) (c)
𝑰
𝑷 𝒓 𝒕 Where
How much interest is charged when 𝑰
P50,000 is borrowed for 1 year at 𝑷 𝒓 𝒕
an annual simple interest rate of
10%
𝐼=𝑃𝑟𝑡 𝐼 =(50,000)(0.1)(1)
50,000 𝐼=5,000
10% or 0.1
1
Teresa borrowed P120,000 from her uncle. If 𝑰
Teresa agreed to pay an 8% annual interest 𝑷 𝒓 𝒕
rate, calculate the amount of interest she
must pay if the loan period is (a) 1 year, (b) 9
months and (c) 18 months.
𝐼=𝑃𝑟𝑡 𝐼 =(120,000)(0.08)(1)
120,000 𝐼=9,600
8% or 0.08
𝑰= 𝑃𝑟𝑡 Note:
120,000 𝑰=(120,000)(0.08)(0.75)
When the time expressed in
months (, it should be converted to
8% or 0.08 𝑰=7,200
years by
or
𝑰= 𝑃𝑟𝑡 𝑰=(120,000)(0.08)(1.5)
120,000 𝑰=14,400
8% or 0.08
or
When invested at an annual interest rate of 𝑰
7%, an amount earned ₱11,200 of simple 𝑷 𝒓 𝒕
interest in two years. How much money was
originally invested?
7% or 0.07
𝑰=11,200
𝒕 =2 𝑷 =80000
If Php13,800 is invested at 5.5% 𝑰
simple interest, how long will it 𝑷 𝒓 𝒕
take to grow an interest of
Php3,036 ?
𝑷 =13800 𝒕=4
5.5% or 0.055
𝑰=3036
Maturity value or future value -amount
after t years; that the lender receives from the
borrower on the maturity date
𝟓/𝟔
Borrow Pay
5000 +¿ 1000 ¿ 6 000
Principal interest
Maturity value
Maturity value or future value -amount
after t years; that the lender receives from the
borrower on the maturity date
Maturity Value or Future value ()

or
where
What is the maturity value Maturity Value or
of a loan amounting to Future value ()
Php25,000 borrowed at 8% 1.
for 1 years? 2.
𝐹 =𝑃 +𝐼 𝑰
𝐹 =25000+𝐼 𝑷 𝒓 𝒕
𝐹 =25000+2000
𝐹 =27000
What is the maturity value Maturity Value or
of a loan amounting to Future value ()
Php25,000 borrowed at 8% 1.
2.
for 1 years?
𝐹 =𝑃 (1+𝑟𝑡)
𝐹 =25000 (1+ ( 0.08 ) ( 1 ))
𝐹 =25000 (1+ 0.08)
𝐹 =25000 (1.08)
𝐹 =27000
To buy the school supplies for the coming
school year, you get a summer job at a resort. 𝑰
Suppose you save ₱4,200.00 of your salary 𝑷 𝒓 𝒕
and deposit it into account that earns simple
interest. After 9 months, the balance is
₱4,263.00. What is the annual interest rate?
₱4,200.00 𝒓 =0.02∨2 %
or
𝑰=4,263 − 4,200=63
To buy the school supplies for the coming
school year, you get a summer job at a resort.
Suppose you save ₱4,200.00 of your salary
and deposit it into account that earns simple
interest. After 9 months, the balance is
₱4,263.00. What is the annual interest rate?
Maturity Value or Future value ()
or
where
Ordinary Interest or Banker's
Interest – interest based on a 360-
day year.
Exact Interest – interest based on a

365-day year
Sample 1
You get a 180-day ₱200 000.00 loan from a
bank at a 10.5% interest. Calculate interest
using (a) 360-day and (b) 365-day year.
Find the amount of interest earned if Php
150,000 was invested at 8% interest for 140
days using the ordinary interest.
On February 2, 2017. Nico borrowed P35,500 from
Alex. He promised to pay the principal amount and
15% simple interest on December 1, 2017. How
much will be the total interest?
Which of the following sets of months
have 30 days?
A.April, June, October, November
B.April, June, September, October
C.June, September, October, November
D.April, June, September, November

Find the number of days from
June 12 to September 27.
A. 109
B. 110
C. 107
D. 108
What is the principal value of Php 50,000 at 5%
simple interest for 3 years?
Find the amount of interest earned if Php 250,000
was invested at 9% interest for 465 days using the
ordinary interest.

Simple Interest

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MATH OF INVESTMENT

AARON PAUL A. CASABAR

Try to save some money

Invest some money

Think of the future

Price of the bag discount Discount price

Price of the shoes discount Discount price

Price of the book discounted Discount price

 Time – amount of time in years the money is borrowed or

Maturity Value or Future value ()

Exact Interest – interest based on a

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