RAL MATHEMAT

ENE ICS
G

SIMPLE AND
COMPOUND INTEREST
PRESENTED BY: GROUP 1
 Objective:
The main objective of this module is for the
students to define what simple and compound
interest is, compute for the simple and compound
interest, and solve real life problems involving
simple and compound interest.
Learning Competencies:
At the end of this module, the learner should be able to...

Illustrates simple and compound interests

Distinguishes between simple and compound
interests
Computes interest, maturity value, future
value, and present value in simple interest and
compound interest environment
Solves problems involving simple and
compound interests
Day 1
 Energizer:
"Simple Karate
Exercises"
Simple Interest
 3 ELEMENTS
PRINCIPAL INTEREST RATE TIME
refers to the amount of refers to the charged refers to the period covered
money extended for credit amount for using the money from the time that the money
or the amount of money over a certain period. It is (principal) is borrowed until its
commonly expressed in due date. The due date of the
deposited in a bank for
percent but is converted to payment of the principal is
safekeeping.
decimal. known as the maturity date.

Maturity Date- the due date of the payment of the principal

Maturity Value- refers to the sum of the principal and interest. It
is the future value of the principal amount
 Simple interest
refers to an interest that is computed on the original
principal during the whole period or time of borrowing.

Where:
I = interest
I = Prt P = principal
r =interest rate
t = time.
 Maturity Value
refers to the sum of the principal and interest. It is the
future value of the principal amount

Where:

M=P+I M = Maturity Value

I = interest
P = principal
Solving Problems
Involving Simple
Interest
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Solution: Simple interest is computed as the product of principal, rate, and time.
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Solution: Simple interest is computed as the product of principal, rate, and time.

I = Prt
I = 200,000 (0.02)(3)
I = 12 000
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Solution: Simple interest is computed as the product of principal, rate, and time.
If looking for maturity value:
M=P+I
where M is the maturity value, P is the principal, and I is the interest.
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Solution: Simple interest is computed as the product of principal, rate, and time.
If looking for maturity value:
M=P+I
where M is the maturity value, P is the principal, and I is the interest.
M=P+I
M = 200,000 + 12,000
M = 212,000
Example:
1. On April 1, 2017, Angela borrowed ₱200,000 for additional working capital
from Prime Lending at 2% interest payable in 3 years. Find the simple
interest.
Solution: Simple interest is computed as the product of principal, rate, and time.
If looking for maturity value:
M=P+I
where M is the maturity value, P is the principal, and I is the interest.
M=P+I
M = 200,000 + 12,000
M = 212,000
Angela must pay ₱212,000 after three years.
Example:
2. Russel borrowed ₱16,500 which is payable after 3 years and 6 months with a
simple interest of 8%. Determine the amount or maturity value of the loan.
Example:
2. Russel borrowed ₱16,500 which is payable after 3 years and 6 months with a
simple interest of 8%. Determine the amount or maturity value of the loan.
Solution:
Step 1: Interest is usually stated as an annual or yearly rate. Thus, you need to
convert the time to the number of years in fraction or decimal form.
Example:
2. Russel borrowed ₱16,500 which is payable after 3 years and 6 months with a
simple interest of 8%. Determine the amount or maturity value of the loan.
Solution:
Step 1: Interest is usually stated as an annual or yearly rate. Thus, you need to
convert the time to the number of years in fraction or decimal form.
3 years and 6 months = 3 6/12 years
3 years and 6 months = 3 1/2 years
3 years and 6 months = 3.5 years
Example:
2. Russel borrowed ₱16,500 which is payable after 3 years and 6 months with a
simple interest of 8%. Determine the amount or maturity value of the loan.
Solution:
Step 1: Interest is usually stated as an annual or yearly rate. Thus, you need to
convert the time to the number of years in fraction or decimal form.
3 years and 6 months = 3 6/12 years
3 years and 6 months = 3 1/2 years
3 years and 6 months = 3.5 years
Step 2: Find the maturity value.
M=P(1+rt) M=21,120
M=16,500[1+(0.08)(3.5)]
M=16,500(1+0.28)
M=16,500(1.28)
Example:
2. Russel borrowed ₱16,500 which is payable after 3 years and 6 months with a
simple interest of 8%. Determine the amount or maturity value of the loan.
Solution:
Step 1: Interest is usually stated as an annual or yearly rate. Thus, you need to
convert the time to the number of years in fraction or decimal form.
3 years and 6 months = 3 6/12 years
3 years and 6 months = 3 1/2 years
3 years and 6 months = 3.5 years
Step 2: Find the maturity value.
M=P(1+rt) M=21,120 Therefore, Russel needs to
M=16,500[1+(0.08)(3.5)] repay the bank ₱21,120 in 3
M=16,500(1+0.28) years and 6 months.
M=16,500(1.28)
This triangle will help you on how to
solve for the principal, rate, time, or
interest. You simply cover the
variable representing what is
needed, and the remaining
variables give you a clue to form
the formula needed to solve for
the unknown.
Example:
Nicole earned an interest of ₱4,400.00 from the money she lent which had a
simple interest of 7% for 4 years. Find the principal.
Example:
Nicole earned an interest of ₱4,400.00 from the money she lent which had a
simple interest of 7% for 4 years. Find the principal.
Solution:
First, we identify the variables.
I = ₱4,400.00
r = 7%
t = 4 years
Example:
Nicole earned an interest of ₱4,400.00 from the money she lent which had a
simple interest of 7% for 4 years. Find the principal.
Solution:
First, we identify the variables. Then, use the formula for computing interest and
I = ₱4,400.00 rearrange it according to what you want to find
r = 7% I = Prt
t = 4 years P = I/rt
P = ₱4,400.00/(0.07)(4)
P = ₱15,714.29
Example:
Nicole earned an interest of ₱4,400.00 from the money she lent which had a
simple interest of 7% for 4 years. Find the principal.
Solution:
First, we identify the variables. Then, use the formula for computing interest and
I = ₱4,400.00 rearrange it according to what you want to find
r = 7% I = Prt
t = 4 years P = I/rt
P = ₱4,400.00/(0.07)(4)
P = ₱15,714.29

Therefore, the principal amount that Nicole lent was ₱15,714.29

 Exercise
Answer Let's Apply A. and Let's Evaluate A.
on a 1 whole sheet of paper
Checking:
Let's Apply A. Let's Apply A.
1. I = ₱ 108,000.00 1. I = ₱300.00
2. I = ₱ 134,000 .00 2. P = ₱33,333.33
3. I = ₱36, 720.00 3. r = 2.27%
4. I = ₱ 40,800.00
4. t = 6 years
5. I = ₱ 52,800.00
5. I = 600,000.00
6. I = ₱ 200,000.00
7. I = ₱ 210,000.00
8. I = ₱ 325,500.00
9. I = ₱ 255,000.00
10. I = ₱ 27,242.92
Day 2
 Energizer:
"DEAL OR NO DEAL"
Compound
Interest
 Compound
Interest
refers to the sum of interests of prior periods computed
on the original or principal amount and each of the
successive periods on both the principal and the interest.
Period- time interval it takes for the money to be converted or to earn interest in
a year.
annual conversion means to compute the interest only…

annually once a year

semiannually twice a year

quarterly four times a year

bimonthly every two months / six times a year

monthly 12 times in a year

semimonthly twice a month / 24 times a year

 If the term of a transaction lasts for two years, then money will be converted
using the following table:
Total Number of
Period Frequency Term of the loan Conversions
annually 1 2 years 2

semiannually 2 2 years 4

quarterly 4 2 years 8

bimonthly 6 2 years 12

monthly 12 2 years 24

semimonthly 24 2 years 48

daily 360 2 years 720

TYPES OF INTERESTS CONCERNING
COMPOUND INTEREST

NOMINAL RATE PERIODIC RATE

refers to the rate of called the interest rate

borrowing and is per compounding period.
quoted as an annual It is equal to the nominal
interest rate rate divided by the
compounding period in a
year
Compound amount
the accumulated value of the principal and all interest
amounts of prior periods. It is typically calculated first
before determining the net interest on the original loan
or investment

P = principal
r =nominal rate
m = number of compounding periods per year
t = time in years.
Compound interest
calculated as the difference between the compound
amount and the original or principal amount.

CI = C - P
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.

Given: P = 12,349
r = 15% or 0.15
m = 4, since compounding is quarterly
t = 1 year
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.

Given: P = 12,349
r = 15% or 0.15
m = 4, since compounding is quarterly
t = 1 year
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.
Substituting the given, we have the following solution.
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.
Substituting the given, we have the following solution.
Example:
1. Example 1: On January 1, Luis borrowed ₱12,349 at 15% compounded
quarterly for a year. Determine the repayment amount at the end of the loan
term.
Solution: The problem is asking for the final amount paid, which is the compound
amount. Thus, we use the formula for the compounded amount.
Substituting the given, we have the following solution.

Therefore, the total amount to be

paid by Luis is ₱14,308.17
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?
Given: P = 120,000
r = 7% or 0.0.07
m = 2, since compounding is semiannually
t = 4 years
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?
Given: P = 120,000
r = 7% or 0.0.07
m = 2, since compounding is semiannually
t = 4 years
Substituting:
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?
Given: P = 120,000
r = 7% or 0.0.07
m = 2, since compounding is semiannually
t = 4 years
Substituting:
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?

Next, we deduct the principal from the compound amount.

I=C−P
I=158,017.08 −120,000
I=38,017.08
Example:
2. How much interest is earned on an investment worth ₱120,000 after 4 years
if it is to receive 7% interest compounded semiannually?

Next, we deduct the principal from the compound amount.

I=C−P
I=158,017.08 −120,000
I=38,017.08
Therefore, the investment will earn
₱38,017.08 in interests after 4 years.
Example:
3. A furnished house is priced at ₱ 534,250 and it increases by 5.6% quarterly
compounded. What is the value of the house after 3 years? What is the
compound interest?
First, we solve for the compound amount. Step 1 is to identify the variables.

P = ₱ 534,250.00
r = 5.6%
t = 3 years
m = 4 (quarterly)
C=?
CI = ?
Example:
3. A furnished house is priced at ₱ 534,250 and it increases by 5.6% quarterly
compounded. What is the value of the house after 3 years? What is the
compound interest?
Next, we substitute the variables into the formula and find the compound amount

P = ₱ 534,250.00
r = 5.6%
t = 3 years
m = 4 (quarterly) C=
C=?
CI = ?
C = ₱ 631,247.96
Example:
3. A furnished house is priced at ₱ 534,250 and it increases by 5.6% quarterly
compounded. What is the value of the house after 3 years? What is the
compound interest?
Now that we've identified the compound amount, solve for the compound interest using
the formula.

P = ₱ 534,250.00 CI = C - P
r = 5.6%
t = 3 years CI = ₱631,247.96 - ₱ 534,250.00
m = 4 (quarterly)
CI = ₱ 96,997.96
C = ₱ 631,247.96
CI = ?
Example:
4. Mike bought a brand new electric guitar which had a price that increased by
7.2% bimonthly compounded. What is the original price if she paid for it for 2
years with a Compound amount of ₱40,000.00
First, we identify the variables and what is asked.

P=?
r = 7.2%
t = 2 years
m = 6 (bimonthly)
C = ₱40,000.00
Example:
4. Mike bought a brand new electric guitar which had a price that increased by
7.2% bimonthly compounded. What is the original price if she paid for it for 2
years with a Compound amount of ₱40,000.00
Next, we adjust the formula according to what is required and substitute the values

P=?
r = 7.2%
t = 2 years
m = 6 (bimonthly)
C = ₱40,000.00
Example:
4. Mike bought a brand new electric guitar which had a price that increased by
7.2% bimonthly compounded. What is the original price if she paid for it for 2
years with a Compound amount of ₱40,000.00
Next, we adjust the formula according to what is required and substitute the values

P=?
r = 7.2%
t = 2 years
m = 6 (bimonthly)
C = ₱40,000.00
P = ₱ 34,665.21
Therefore, the oddly specific price of the electric guitar Mike bought was originally
priced at ₱ 34,665.21
 Exercise
For Items 1-3, fill the table.

4. Jane wishes to have ₱80,000 in her bank account. How much should she deposit in a bank
account that pays 8% compounded quarterly so that after 6 years and 5 months, she can have
her desired money?

4. How much should Cheska set aside and invest in a fund earning 12% compounded
semiannually if she needs ₱50,000 in 4 years?
Checking:
1 - 3.

4. P = ₱48,122.95
5. P =₱ 31,370.62
Day 3
 Let's Recall
Recall the following terms:

Simple interest Compound amount

Compound interest Period
Principal Nominal rate
Interest rate Periodic rate
Time
Maturity Date
Maturity Value
 Let's Recall
What is the formula for simple interest?
 Let's Recall
What is the formula for simple interest?

I = Prt
 Let's Recall
What is the formula for simple interest?

I = Prt
What is the formula for Maturity Value?
 Let's Recall
What is the formula for simple interest?

I = Prt
What is the formula for Maturity Value?

M=P+I
 Let's Recall
What is the shape that will help you solve the principal, rate,
time or interest?
 Let's Recall
What is the shape that will help you solve the principal, rate,
time or interest?
 Let's Recall
What is the formula for compound amount?
 Let's Recall
What is the formula for compound amount?
 Let's Recall
What is the formula for compound amount?

What is the formula for compound interest?

 Let's Recall
What is the formula for compound amount?

What is the formula for compound interest?

CI = C - P
 Let's Recall
Bonnie borrowed ₱350,000 for additional working capital
from Prime Lending at 3.5% interest payable in 5 years. Find
the simple interest.
 Let's Recall
Bonnie borrowed ₱350,000 for additional working capital
from Prime Lending at 3.5% interest payable in 5 years. Find
the simple interest and the maturity value.

I = ₱61,250.00
M = ₱411,250.00

Bonnie must pay ₱411,250.00 after five years.

 Let's Recall
Kim borrowed ₱16,382 at 18.5% compounded bimonthly for 2
years. Determine the repayment amount at the end of the
loan term
 Let's Recall
Kim borrowed ₱16,382 at 18.5% compounded bimonthly for 2
years. Determine the repayment amount at the end of the
loan term

C = ₱23,584.59

Therefore, the total amount to be paid by Kim is ₱23,584.59

Something to
Remember
 Exercise:
"OKOK Activity"
 OKOK Activity
Look for the missing variable(s)
Item 1
P = Php 22,300.00
I = Php 8,500.00
r = 15.4%

Find:
t=?
 OKOK Activity
Look for the missing variable(s)
Item 2
P = Php 36,650.00
I = Php 5,460.00
t = 4.8 years

Find:
r=?
 OKOK Activity
Look for the missing variable(s)
Item 3
r = 7.6%
m = 4 (quarterly)
t = 2 years
C = ₱24,245.52
Find:
P=?
 OKOK Activity
Look for the missing variable(s)
Item 4
P = ₱36,690
r = 4.5%
m = 2 (semiannually)
t = 3 years
Find:
C=?
 OKOK Activity
Look for the missing variable(s)
Item 5
I = ₱6,905.00
t = 7 years
r = 5.6%

Find:
P=?
 OKOK Activity
Look for the missing variable(s)
Item 6
P = ₱96,354
r = 3.6%
m = 24 (semi-monthly)
t = 7 years and 6 months
Find:
C=?
CI = ?