11

General
Mathematics
Quarter 2 – Module 1
Simple & Compound
Interests

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General Mathematics – Grade 11
Alternative Delivery Mode
Quarter 2 – Module 1: Simple & Compound Interests

Second Edition, 2021

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Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writers: Sheryl Bunga Muring

Lorna B. Abellana
Editors: Pureza V. Galagar
Elvira I. Jabonillo PhD
Marlon L. Jala PhD
Management Team: Bianito A. Dagatan EdD CESO V
Schools Division Superintendent

Faustino N. Toradio PhD

Assistant Schools Division Superintendent

Felix C. Galacio Jr. PhD

EPS, Mathematics

Josephine D. Eronico PhD

EPS, LRMDS

Printed in the Philippines by Schools Division of Bohol

Department of Education – Region VII, Central Visayas

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Learning Competencies:
Illustrates simple and compound interest. (MIIGM-IIa-1)
Distinguishes between simple and compound interest. (MIIGM-IIa-2)
Computes interest, maturity value, future value and present value in
simple and compound interest. (MIIGM-IIa-b-1)
Solves problem involving simple and compound interest. (MIIGM-IIb-2)

At the end of the lesson, you are expected to:

 illustrate simple and compound interest;
 distinguish between simple and compound interest;
 compute interest, maturity value, future value and present value in
simple and compound interest; and
 solve problem involving simple and compound interest.

Lesson
Simple & Compound Interests
1

What is it

Definition of Terms:
 Lender or creditor - person (or institution) who invests the money or makes the
funds available
 Borrower or debtor - person (or institution) who owes the money or avails of the
funds from the lender
 Origin or loan date - date on which money is received by the borrower
 Time or term (t) - amount of time in years the money is borrowed or invested;
length of time between the origin and maturity dates
 Principal (P) - amount of money borrowed or invested on the origin date
 Rate (r) - annual rate, usually in percent, charged by the lender, or rate of increase
of the investment
 Interest (I) - amount paid or earned for the use of money
 Simple Interest (Is) - interest that is computed on the principal and then added to
it
 Compound Interest (Ic) - interest is computed on the principal and also on the
accumulated past interests

Simple Interest:
I = Prt
Where,
I = interest P = principal r = interest rate t = time

Compound Interest:
𝒓
A = P (1+ )ct
𝒄
Where,
A = amount (future value) P = principal r = rate t = time
c = number of compounding per year:
c = 1(annually) c = 2 (semi-annually) c = 4 (quarterly)
c = 12 (monthly) c = 365 (daily)

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Simple Interest vs. Compound Interest

 If you’re a borrower who doesn’t want to get stuck with expensive debt that takes
years to eliminate, you’ll probably want a loan with interest that doesn’t compound.
But if you’re an investor looking to earn lots of money that you can use in
retirement, it’s best to search for an account with interest that
compounds frequently.

 Compound interest is greater than simple interest:

Compound interest is greater than simple interest. The reason is very simple. Under
simple interest system, the interest is computed only on principal amount whereas
under compound interest system, the interest is computed on principle as well as on
accumulated interest.

What’s More

Directions: Read carefully each situation. Then, answer the question in each number
and support your answer.
1. Miss Jennelyn avails a cash loan from her friend for her son’s tuition fee. Her
friend let her choose what interest will be used on her borrowed money – it’s either
simple or compound interest. If you were Ms. Jennelyn, what would you choose?
Why?

2. Miss Joy has P150,000.00 which she plans to put an investment for 3 years. She is
choosing between simple and compound interest to be used. If you were Ms. Joy,
what would you choose – simple or compound interest? Why?

Lesson Compute interest, maturity value, future value

2 and present value in simple and compound
interest

What is it
SIMPLE INTEREST

How to compute simple interest:

Simple Interest (Is) - interest that is computed on the principal and then added to it
I = Prt
Where,
I = interest P = principal r = interest rate t = time
Examples:
1. Suppose you invest P1000.00 at 7% simple interest. How much money will
you have after 6 years?
Solution:
Given: P = P1000.00 r = 7% t = 6 years I=?
a. I = Prt
I = (1000)(0.07)(6)
I = P420.00

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 b. Final amount of money (F) = Principal (P) + Interest (I)
F=P+I
F = 1000 + 420
F = P1,420.00
Thus, P1,420.00 is the amount of money after 6 years.
2. How much money was borrowed if the interest at 3% after 6 months is
P300?
Solution:
Given: I = P300 r = 3% t = 6 months P=?
a. 6 months = ½ year
𝐼
b. P= 𝑟𝑡
300
P= 1
0.03( )
2
P = 20,000.00
Therefore, the amount borrowed was P20,000.00
3. At what rate should be P15,000 be invested in order to have a final amount
of P15,750.00 in one month?
Solution:
Given: P = 15,000 F = 15,750 t = 1 month r=?
a. 1 month = 1/12 year b. I = F – P
𝐼
c. r = I = 15,750 – 15,000
𝑃𝑡
750
r= 1 I = 750.00
15,000( )
12
r = 0.6
r = 60%
Thus, the rate that the money should be invested is 60%

4. How many years would it take for P1800 to grow until P4,000 if it is invested at
15% simple interest?

Solution:

Given: P = 1800 F = 4000 r = 15%

a. I =F – P
I = 4000 – 1800
I = 2200
𝐼
b. t = 𝑃𝑟
2200
t= 1800(0.15)
t ≈ 8.148…
t ≈ 8 years

How to compute maturity or future value in simple interest:

 Repayment date or maturity date as date on which the money borrowed or
loan is to be completely repaid
 Maturity value or future value (F) - amount after t years; that the lender
receives from the borrower on the maturity date
Formula:
A=P+I or A = P + Prt or A = P(1 + rt)

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Where, A = Maturity Value P = Principal I = Interest
Examples:
1. At what simple interest rate per annum will 25,000 accumulate to 33,000 in 5
years?
Given: P = 25,000 A = 33,000 t = 5 years
A = P(1 + rt)
33,000 = 25,000(1 + r(5))
33,000 25,000
= (1 + r(5))
25,000 25,000
1.32 = 1 + 5r
1.32 - 1 = 5r
0.32 = 5r
0.32 5𝑟
=
5 5
0.064 = r
6.4% = r
2. Grace deposited P1000 today in a bank providing 4% simple interest per year. She
wants to have savings worth P2000 in the future. If she will not withdraw any
amount, how long must she wait?
Solution:
Given: P = 1000 r = 0.04 A(t) = 2000
A = P(1 + rt)
2000 = 1000(1 + 0.04t)
2000 1000
= (1 + 0.04t)
1000 1000
2 = 1 + 0.04t
2 -1 = 0.04t
1 = 0.04t
1 0.04𝑡
=
0.04 0.04
t = 25
It will take 25 years for Grace’s deposit to be worth P2000.00
3. If you deposit P1500 in an account paying 10% simple interest for 2 year,
determine the future value of the deposit.
Solution:
Given: P = 1500 r = 0.1 t = 2 years
A= P(1 + rt)
A= 1500[1 +(0.1)(2)]
A= 1800.00

How to compute present value in simple interest:

Present Value is the amount A needed now to accumulate A in time t.
Formula:
𝑨
P=
(𝟏+𝒓𝒕)
Examples:
1. Find the present value of P5500.00 due in three years at simple interest rate of
2.5% per year?
Solution:
Given: A = 5500 r = 0.025 t = 3 years
𝐴
P=
(1+𝑟𝑡)
5500
P=
(1+0.025(3))
P = 5,116.28
2. As preparation for Ava’s college studies, her parents want to save an amount of
P200,000 after 3 years. If they decide to deposit it in a bank offering an annual
simple interest rate of 3%, how much do they need to deposit now?
Solution:
Given: A = 200,000 r = 0.03 t = 3 years
200,000
P=
(1+(0.03)(3))

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 5500
P=
(1+0.03(3))
P = 183,486.24
P183,486.24 is the present value of P200,000 at 3% simple rate of interest per year.
3. Mrs. Garcia currently has P30,000 in an account providing 5% simple interest per
year. She wishes to have P55,000 in 5 years but she noticed that her savings are not
enough to accumulate that amount. How much additional money must she deposit
now in order to achieve her goal?
Solution:
Given: P = 30,000 r = 0.05 t = 5 years
𝐴
a. A = P(1+rt) c. P =
(1+𝑟𝑡)
17,500
A = 30,000(1+(0.05)(5)) P=
(1+(0.05)(5))
A = 37,500 P = 14,000.00

b. P55,000 – P37,500 = P17,500.00

Therefore, Mrs. Garcia needs an additional deposit of P = 14,000.00.

COMPOUND INTEREST
How to compute compound interest:
Compound Interest (Ic) - interest is computed on the principal and also on the
accumulated past interests
𝒓
Formula: A = P (1+ )ct
𝒄
Where, A = amount (future value) P = principal r= rate t = time
c = number of compounding c = 1(annually) c = 2 (semi-annually)
c = 4 (quarterly) c = 12 (monthly) c = 365 (daily)
Examples:
1. Find the compound amount on deposit at the end of 1 year if P10,000 is deposited
at 3% compounded annually.
a. Given: P = 10,000 r = 0.03 t=1 c=1
𝑟 ct
A = P (1+ )
𝑐
0.03
A = 10,000 (1+ )(1)(1)
1
A = P10,300.00
2. If Ana deposits P6500.00 into an account paying 10% annual interest compounded
monthly, how much money will be in the account after 7 years?
Solution:
Given: P = 6500 r = 0.1 t=7 c = 12
𝑟 ct
A = P (1+ )
𝑐
0.1
A = 6500 (1+ )(12)(7)
12
A = P13,051.48
3. If you deposit P5000 into an account paying 5% annual interest compounded
monthly, how long until there is P10,000 in the account?
𝑟
A = P (1+ )ct
𝑐
0.05 12t
10,000 = 5000 (1+ )
12
10,000 5000 0.05 12t
= (1+ )
5000 5000 12
0.05 12t
2 = (1+ )
12
2 = 1.0041612t
Log 2 = log (1.0041612t)
Log 2 = (12t)(log1.00416)
log 2
= 12t
log1.00416
166.97 ≈ 12t
166.97 12𝑡
≈
12 12
t ≈ 13.9 t = 13 years, 10 months, 24days

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How to compute the Maturity or Future Value under Compound Interest:
Maturity or Future Value under Compound Interest - amount after t years; that the
lender receives from the borrower on the maturity date
𝒓
Formula: A = P (1+ )ct
𝒄
Where, A = amount (future value) P = principal
r= rate t = time c = number of compounding
Examples:
1. Find the future value of P500 at 8% after 3years compounded annually.
Given: P = 500 r = 0.08 c = 1(compounded annually) t=3
𝑟
A = P (1+ )ct
𝑐
0.08
A = 500 (1+ )1(3)
1
A = P629.86
2. At what interest rate, compounded annually must P12,000 be invested in order to
earn an interest worth P2000 in 4 years?
Given: P = 12,000 A = 14,000 c = 1(compounded annually) t = 4
𝑟
A = P (1+ )ct
𝑐
𝑟
14,000 = 12,000(1+ )(1)(4)
1
14,000 12,000 𝑟
= (1+ )(1)(4)
12,000 12,000 1
1.167 = (1+ r)4
4
√1.167 = 1 + 𝑟
4
√1.167 − 1 = 𝑟
𝑟 ≈ 0.0393
Thus, the interest rate should be 3.93%
3. How long will it take for P20,000 to grow to P24,000 if it is invested at 8.5%
compounded monthly:
Given: A = 24,000 P = 20,000 r = 0.085 c = 12 (compounded monthly)
𝑟
Solution: A = P (1+ )ct
𝑐
0.085 12t
24,000 = 20,000(1+ )
12
24,000 0.085 12t
= (1 + )
20,000 12
1.2 = 1.00708333312t
Log 1.2 = 12t(log1.007083333) (applying the law on logarithms)
Log 1.2
=𝑡
12(log1.007083333)
2.15 = t
t = 2 years, 1 month and 24 days
(a. (0.15)(12months) = 1.8 months = 1 month
b. (0.8)(30 days) = 24 days)

How to compute the Present Value (P) at Compound Interest:

Present Value at compound interest:
a. present value of A at an annual compound interest rate r is P
𝑨
P= 𝒕 (𝟏+𝒓)
b. Present value of A at an annual interest rate of r compounded c times a year
𝑨
P= 𝒓 𝒄𝒕
(𝟏+𝒄 )
c. present value of A at an annual interest rate of r compounded continuously
𝑨
P = 𝒓𝒕 = Ae-rt
𝒆
Examples:
1. What is the present value of P10,000 due in 7 years if money is worth 10%
compounded annually?
Solution:
Given: A = 10,000 r = 0.1 t=7 P=?
𝐴
P= 𝑡
(1+𝑟)
10,000
P=
(1+0.1)7
P = 5,131.58

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2. Two years from now, Mr. Ronnie wants to start a business. In order to do that, he
estimated that he needs an initial capital of P60,000. He can deposit an amount
today in one of the following accounts:
 Account 1: offers 1.5% annual compound interest rate
 Account 2: offers 1.4% annual interest rate compounded quarterly
 Account 3: offers 1.1% annual interest rate compounded monthly
 Account 4: offers 1% annual interest rate compounded continuously
Which of the accounts will require the least deposit?

Solution:
a. Account 1: c. Account 3:
𝐴 𝐴
P = (1+𝑟)𝑡 P= 𝑟 𝑐𝑡
(1+ )
𝑐
60,000 60,000
P= P= 0.011 (12)(2)
(1+0.015)2 (1+ )
12
P = 58,239.70 P = 58,695
b. Account 2: d. Account 4:
𝐴 𝐴
P= 𝑟 𝑐𝑡 P=
(1+ ) 𝑒 𝑟𝑡
𝑐
60,000 60,000
P= 0.014 (4)(2) P=
(1+ ) 𝑒 (0.01)(2)
4
P = 58,346.15 P = 58,811.92

Account 1 requires the smallest deposit.

What’s More

I. General Instructions: Solve what is asked in each number. Show your solution.
1. Complete the table below using simple interest.

Principal Rate Time Interest Final Amount

1200 1% 12 1212
5
100 2 months 5/6 100
6

5% 2 years 5000 55,000

2. Find the future value of P1000 at 7.5% after 3years compounded quarterly.

Lesson Solving Problems involving Simple & Compound

3 Interests

What is it
Knowledge on simple and compound interest is very helpful in making decisions
regarding on business and money.

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Examples:
1. Suppose you invest P2000 at 3% simple interest. How much money will you have
after 6 months?

Solution:
Given: P = 2000 r = 0.03 t = 6 months or ½ year
I = Prt F=P+I
I = 2000(0.03)(0.5) F = 2000 + 30
I = 30 F = 2030
2. What is the present value of P30,000 due in two years and 6 months if money is
worth 9% compounded quarterly?
Solution:
Given: A = 30,000 t = 2 ½ years r = 0.09 c = 4 (compounded quarterly)
𝐴
P= 𝑟 𝑐𝑡
(1+𝑐 )
30,000
P= 0.09
(1+ 4 )(4)(2.5)
P = 10,978.12
3. What is the amount of interest and maturity value of a loan for P20,000 at 6%
compound interest for 3 years?
Solution:
Given: P = 20,000 r = 0.06 t = 3 years
Find: (a) maturity value (b) compound interest
A(t) = P(1+r)t
a. A = 20000 (1+0.06)3 b. Compound Interest = Maturity value – Principal Amount
A = 23,820.32 Ic = 23,820.32 – 20,000
Ic = 3,820.32

What’s More

Directions. Solve the problems below. Show your solution.

1. If a person borrowed P88,800 at an annual simple interest rate of 10¼% for 18
months, how much interest should she pay?

2. In a certain bank, Mark invested P88,000 in a time deposit that pays 0.5%
compound interest in a year. How much will be his money after 6 years? How much
interest will he gain?

Assessment

Directions: Read carefully each item and select the best answer. Write your
answer on the answer sheet.

1. The simple interest formula is I = Prt. What does I represent?

a. income b. interest c. interval d. investment

2. The following is the formula in computing the maturity or future value in

simple interest, EXCEPT:

a. A = P + I b. A = P + Prt c. A = P(1 + rt) d. I = Prt

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3. Which of the following is true on the differences between simple and
compound interest ____________

i. Simple interest is based on the principal amount and the interest that
accumulates on it every period while compound interest is based on the principal
amount of a loan or deposit.

ii. Simple interest paid or received over a certain period is a fixed

percentage of the principal amount that was borrowed or lent while compound
interest accrues and is added to the accumulated interest of previous periods, so
borrowers must pay interest on interest as well as principal.

iii. Simple interest is based on the principal amount of a loan or deposit

while compound interest is based on the principal amount and the interest that
accumulates on it every period.

iv. Simple interest accrues and is added to the accumulated interest of

previous periods, so borrowers must pay interest on interest as well as principal
while compound interest paid or received over a certain period is a fixed
percentage of the principal amount that was borrowed or lent.

a. i and ii b. ii and iii c. iii and iv d. i, ii, iii and iv

4. What is the formula in finding the rate of present value in a simple interest?
𝐴 𝐴
(𝐴−𝑃)−1 −1 (𝐴−𝑡)−1 −1
a. r = b. r = 𝑡
c. r = d. r = 𝑃
𝑡 𝑃 𝑃 𝑡
𝑟
5. The formula in finding the compound interest is A = P (1+ )ct, where c stands for
𝑐
the number of compounding. Ana deposits P6500.00 into an account paying 10%
annual interest compounded monthly, her money after 7 years is P13,051.48. In the
given problem, c = 12 since it is compounded monthly. What is the value of c if it is
compounded quarterly?
a. 1 b. 2 c. 3 d. 4
6. What is the present value of P145,000 due in 15 years if money is worth 12%
compounded semi-annually?

a. P26,246.00 b. P25,245.97 c. P25,200.97 d. P24,246.00

7. Compute the future value of P1800.00 at 2.5% after 6 years compounded annually
a. P1,827.17 b. P1,939.29 c. P2,087.45 d. P6,866.46
8. How long will a principal earn an interest equal to one-third of it at 6% simple
interest?

a. t = 6 years, 5 months, 20 days b. t = 5 years, 5 months, 20 days

c. t = 5 years, 6 months, 20 days d. t = 6 years, 6 months, 20 days

9. How much will James gain if he invests P350,000 for 5 years at 7% simple
interest?
a. P12,250.00 b.P122,500.00 c.P472,500.00 d.P1,225,000.00

10. Miss. Joy estimated that she needs an initial capital of P150,000 which she plans
to put an investment for 3 years. She is choosing between two investments.
Investment A credits 5% interest compounded monthly, while investment B credits
5.2% interest compounded quarterly. Which investment is better?
a. investment B b. investment A
c. either of the two investments d. none of the two investments

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 Answer Sheet

Name: __________________________________________________________
Grade & Section: ________________ Score: _______

Quarter 2 – Module 1

Lesson 1
What’s More
1.
2.

Lesson 2
What’s More
1.
2.

Lesson 3 Assessment
What’s More 1.
1. 2.
2. 3.
4.
5.
6.
7.
8.
9.
10.

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References
Leo Andrei A. Crisologo, et al 2016. General Mathematics Teacher’s Guide. Pasig City:
Lexicon Press Inc.
Lynie Dimasuay, et al 2016. General Mathematics. Quezon City: C & E Publishing Inc.
Ricardo B. Banigon, et.al 2016. General Mathematics for Senior High School. Quezon
City: Educational Resources Corporation
https://www.investopedia.com/ask/answers/042315/what-difference-between-
compounding-interest-and-simple-interest.asp
https://smartasset.com/investing/difference-between-simple-and-compound-interest
https://www.accountingformanagement.org/simple-and-compound-interest/

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