bucs-mathdept.mmw.

module

Learning Outcomes: At the end of Module B, the learner should demonstrate the following:

On knowledge acquisition:

On computing skills development:

On analytical skills development

On holistic applications of quantitative reasoning:

bucs-mathdept.mmw.module

Simple Interest: It is the amount that is earned with a deposit or it is an amount owed in
addition to a loan amount taken.

Illustrate
Put in P2,000.00 in a bank
d
Problem
for Interest is at 10 percent per year
Simple
After three years the P2,000.00 will have earned some money.
The final amount in three years will be the total value of the initial deposit.

P2000.00 (Initial Deposit =PRINCIPAL)

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1ST Year 2nd Year 3rd Year

Interest Earned at the End of 3 rd year

I(nterest) =P(rincipal)x R(ate) x T(ime)

From the Given: I(nterest) = ?

P(rincipal) = P2000.00

R(ate) = 10% = 0.10

T(ime) = 3 (years)

I = 2000 x 0.10 x 3 = 600

Final Value What would be the final value of a P2000 deposited at a bank, at 10% interest per year,
after three years?
Final Value = Principal x (1 + Rate x Time)

FV = P2000 x (1 + 0.10 x 3)=P2600

Sample Problems:

SP1. Mr. Kevin wants to invest P25,000 so she could earn P10,000.00 interest. He is
considering investing in a cooperative that pays 6.5% interest per year. How long will he wait, while
keeping the money with the coop, for him to realize an interest of P10,000.00?

SP2. Ms. Julie was able to earn an interest of P8,400.00 for an investment at 12.6% per year
for 4.5 years. How much was her investment?

SP3. What was the interest of a loan Mr. Kurt took with Finance Corp YYY if a loan for
P60,000.00 became 74,500.00 after 3.6 years?

SP4. What will be the total interest on a loan of P12,800.00 that Ms BB took from her sister
who charged 2.5% per month, after a year?
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WORKING BACKWARDS

a. If I wanted to have P2600 at the end of three years when interest is at 10% per year, how
much must I initially deposit? [Rewording of our illustrated problem ]
Final Value = Principal x (1 + Rate x Time)
Final Value = Principal x (1 + Rate x Time) ….
P2600 = Principal x (1 + 0.10 x 3)
We Know FV, Rate and Time, we need to find the Principal P2600 = Principal x (1.3)
P2600/1.3 = Principal = P2000

b. If I have P2000 that I can deposit and I want to let it grow to P2600 after 3 years; what
simple interest rate must I deposit it for?
Here we want to determine Rate in the Equation: Final Value = Principal x (1 + Rate x Time)
P2600 = P2000 x(1 + Ratex3)
P2600 = P2000x 1 + [P2000 x Ratex3)
P2600 – P2000 = P2000xRate x3
P600 = P6000x Rate
P600/P6000 = Rate = 0.10
c. How many years will it take P2000, deposited at 10 percent
Interest rate per year, to grow to P2600?

Here we want to find Time (in Years)

Final Value = Principal x (1 + Rate x Time)

P2600 = P2000l x (1 + 0.10 x Time)

P2600 = P2000x1 +( P2000x 0.10xTime)
P2600 – P2000 =P2000x 0.10xTime
P600 = P200x Time
P600/P200 = Time = 3 Year

Solved Examples:

SE1. Ruths borrowed P10,000.00 from his friend at 5% interest per year. He plans to pay a
year after he graduates (i.e. in 5 years). He makes a formal receipt to his friend stating:

I, Ruths, a single Filipino citizen, aged 19, hereby pledge to pay the P10,000.00 I borrowed from
Dwight Carmichael of Pilar, Sorsogon, the amount of P ________________, five years from today,
August 30, 2020. Issued this 30th day of June 2020 at Legazpi City.

How much must Ruths fill-in the blank in the above declaration?

SE2. TO BE CHANGED, TAKEN FROM THE INTERNET

Jessica invests $3,000 in a credit union at an interest rate of 3.9%. She leaves the money there for 5 years.
What is her balance after that time?

First, using the formula for simple interest, fill in all of the numbers you know.

prt===$30003.9% or 0.0395 years
II==PRT(3000)(0.039)(5)
Next, solve for I. 
II==(3000)(0.039)(5)585
Then, to find the bank balance, add the interest earned to the amount invested.

balance==3000+5853585
The answer is 3585.
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COMPOUND INTERESTis money earned on a principal amount deposited when earnings on the
deposit is made more than once a year or when the interest earned on the deposit continue to earn
interest. It is also the amount owed on top of a principal value of a loan when such additional owed
amount is computed more than once a year or when interest earned continue to earn interest.

Illustrated
PinoiRepublika borrows P2000 from Bombai at 20% annual interest
Problem for compoundedquarterly. How much will Pinoi owe Bombai after one year?
Compound
Interest

P2000.00 (Initial Loan =PRINCIPAL)

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1STQtr 2ndQtr 3rdQtr 4thQtr

Final Value at End of year (or after 4 quarters)

is what we need to determine for this problem.

nt
r
Compound Interest Formula: FV =P 1+ ( ) n

where: FV = Final Value

P = Principal Value
R = Interest Rate Per Year
n = Number of times of compounding per year
t = number of years
4 x1
0.20
For this example:
P =P2000, r = 0.20, n = 4 quarters (per year), t =1 (year)
(
FV =P 2000 1+
4 )
F V = P2000 (1 +0.05)4

FV = P2000x1.215506

*From the Final Value of P2431.013 ~P2431.00, the total

interest earned at the end of 4 quarters or one year is P431.00 which is slightly higher than 20%
simple annual interest rate of P2000, which is P400.00.

Compounded interest through prolonged period of time accumulates rapidly if the loan
amount is large. Be careful when taking out loans or amortizing (paying equal instalments) any
goods or services.

Solved Examples:

SE1. A motorbike is for sale at P75,000.00, cash or on instalment for a downpayment

ofP5000.00 plus 36 monthly instalments of __________________ if prevailing interest rate is 20%
per annum.
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This problem will require using the Equal Monthly Installment [EMI] calculator or formula.
We will solve this to highlight the difference between saving for buying on cash basis a motorbike
and buying the same on instalment basis.

[P X R x (1 + R)N]
EMI = --------------------------
[ 1 + R]N - 1

SE2. Ayah takes our a postpaid mobile phone service for an APhone at P2500.00 per month
with a lock-in period of 2 years. If the APhone costs P________, how much more is paid by Ayah
with the postpaid plan than by buying the APhone by cash?

SE3. Condrado needs a laptop for his senior year in BSCS next year. He plans to buy it for
cash 10 months from now, approximating its price by then at P58,000.00. He begins a part time job
by September this year and plans to set aside P3000.00 per month and depositing it at 15% per
annum compounded monthly. How much will Condrado save after 10 months?

SE4. Mikael resells siomai with a P15.00 markup per pack. If Mikael sells 120 packs per
month and deposits the total sale at 20% interest per year compounded quarterly, how long will he
need to save until he saves P25000 for his to start his own small business?

SE5. Maribelle wants to save P150K at the end of her 4-year schooling to open her own art
studio. How much must she save every two months for 48 months if interest rate at a rural bank is
16% per annum compounded four months?

SELF-HELP/Student Exercises

SHSE1. A nurse put $22,000 in the bank 15 years ago. She has earned $21,450 in
interest—nearly as much as her initial investment. What was the interest rate
that the bank was paying her if it was compounded quarterly? To be changed.

SHSE2. A bank is offering an interest rate of 4.75% compounded monthly. How long
would it take to earn $500 if you invested $12,000 in the bank? To be
changed.

SOLVING FOR TIME for Compound Interest Problems.

nt
r
We use the same formula: FV =P 1+ ( )
n

nt
r
We can write this formula as: A=P 1+ ( ) n
Where: A = the amount of the investment/loan at the end of the period
P = principal amount invested/loaned
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r = interest rate (in decimal) per unit of time (t)

n = the number of times of compounding in a year
t = the time (in years)

We shall first use a simple problem and use the solution to this to learn how to solve
to time.

Example: A P15,000.00 investment is made at 8% interest per annum, compounded

quarterly. How much will the investment be after 10 years?

For this problem, we have: P = 15,000

r = 0.08
n = 4 (4 quarters per year)
t = 10
A = unknown

Solving for A, we substitute the givens to the equation:

4∗10
0.08
A=15,000 1+ ( 4 )
40
A=15,000 ( 1.02 ) = P33,120.59

CIntS1.Using our solution above, we rephrase the problem to make t the unknown…
How long will it take (in years) for an investment of P15,000.00 at 8% annual interest rate, to
grow to P33,120.59?
For this problem, we have: P = 15,000
r = 0.08
n = 4 (4 quarters per year)
A = P33,120.59
t = unkknown

Substituting the values to the formula, we have:

4t
0.08
33,120.59=15,000 1+ (
4 )
33,120.59/15,000 = (1.02)4t We need to bring 4t in the exponent down
2.208039 = 1.024t so we can handle it. To do this we use the
log(2.208039) = log( 1.024t) logarithmic function. Remember that:
0.34400 = 4t*log(1.02)
log(xp) = plog(x)
0.34400/(4*log(1.02)) = t log (xy) = log(x) + log(y)
Note: we expected t=10 from the previous
log(x/y) = log (x)/log(y)
Example, but it is a good feeling that we are able
0.34400/4*(0.0086) = t = 10 to reach the same answer by using the compound
interest formula.

CIntS2. A police officer, received disability benefits due to a gunshot suffered while on duty,
which made him incapable of working. To ensure that his young children will have college
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budget, he deposits P120,000.00 each for his 3 children at 6% per annum compounded
monthly. How long will it take for this investment to grow to P200,000.00?

12t
0.06
200,000=120,000 1+ ( 12 )
200,000/120,000 = 1.00512t
log(1.666667) = log(1.00512t)

0.221849 = 12t*log(1.005) This means that it will take approximately

8.54 years for the initial investment to grow to
0.221849/(12*log(1.005)) = t = 8.535037 the target amount of P200,000.00

CIntS3.Sofia, a young professional, carries a credit card with Bank M which charges 15%
interest rate per annum, compounded monthly. Because Sofia is approved for a credit limit of
100,000.00, it is okay for her not to pay monthly dues until she exceeds this limit. How long will a
credit card charge of P45,000.00 (made by a friend), with whom she spent a 3-day long weekend
vacation in Singapore, become P100,000.00 if her friend‘forgets’ about making payments?

For this problem, we have: P = 45,000

r = 0.15
n = 12 (12 months per year)
A = P100,000.00
t = unknown

Substituting the values to the formula, we have:

12t
0.15
100,000=45,000 1+ ( 12 )
100,000/45000 = 1.012512t
log(2.22222) = 12t*log(1.0125)
log(2.22222)/12*log(1.0125) = t = 5.35658 years

What impact does CIntS3 make on you?

When is a credit card necessary? When is a credit card not recommended?
What are the challenges of having a high credit limit on a credit card?
If the ride-on amount of Sofia’s friend was P10,000.00, which she forgets to pay and
which Sofia is embarrassed to ask payment for, will this be okay? Why?
Watch youtube videos of 3 homeless professionals in the U.S./U.K and make a
connection, if any, to this credit card example.

CIntS4. Struggling families borrow money from banks to send their children through school.
Let’s understand how cooperatives charge interest rates and perhaps also understand how
some parents struggle to send their children to college, thereby learn to deeply appreciate
life’s opportunities however little, or however much, you are given by your parents.
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Berta takes out a loan of P50,000.00 for the first semester SY 2020 enrolment college
expenses of her son on his fifth year for a 4-year course, at 2% interest per month. Berta
works triple time to afford to pay P2800.00 per month to the cooperative until the loan is
paid for. Let’s use an excel spreadsheet to visualize how cooperatives work:

Note: This is a simplified computation

which does not include processing
fees, insurance, other charges.

Form groups of 5 members, then

study the payment schedule for Berta’s
cooperative loan and discuss among your
groupmates how this information
affects your understanding of the
challenges of those who need to borrow
from cooperatives? How does this
information compare with a loan made
with banks or loan sharks?

How do you relate the net proceeds with the

total payment of P62,479.07?

Make INDEX/INDICESwork for you.

Return on Investment
Consumer Price Index

There are times when people

Body Mass Index
Crime Rate

compare salaries of professionals

of this generation with the
previous generation; or even Mortality
jeepney fares 5 years ago with Grade Point Average Rate
those of this year.

In these, and similar, instances, we have to remind ourselves that we speak of

different times, therefore might be comparing values that are not directly comparable.
More or less, most realize that a kilo of rice in 2010 was logically cheaper than a kilo of
rice this 2020 because P100 in 2010 could buy much more than a P100 in 2020.

Directly comparable numeric values when referring to different periods (i.e. prices of goods in two
different years) or different persons (i.e. weight & height) use index numbers or
ratios. Let us learn some indices to be able to appreciate how one should use directly
bucs-mathdept.mmw.module

comparable measures if the intention is to compare a state of economic life, health,

and the like.

Purchasing power of the peso.

To calculate the purchasing power, collect the CPI information from the Bureau of Labor
Statistics. In January 1975, the CPI was 38.8 and in January 2018, was 247.9. Divide the
earlier year by the later year and multiply by 100 to derive the CPI change during that period:
(38.8 / 247.9) x 100 = 15.7 percent.https://www.google.com/search?
q=purchasing+power+of+peso&oq=purchasing+power&aqs=chrome.3.69i57j0l7.184
24j1j7&sourceid=chrome&ie=UTF-8

Comparing the purchasing

power of the peso in July 2019 CPI, Philippines
to that in June 2020, we have

120.2/122.6 = 0.980424
This is the change in
CPI in Jan 2020 from Jul
2019. Thus the purchasing
power of the peso decreased.
Say, a P100 in Jul 2019 could
Buy only P100*(0.980424)
https://tradingeconomics.com/philippines/consumer-price-index-cpi
= P98.0424 amount of goods.

BMI, Body Mass Index. If we compare two individuals in terms of weight alone or
height alone, we will not be able to properly convey the information about how well
the individual manages his wellness/health. Because one who is tall but very thin
will weigh less, than one who is short but chubby. The BMI is a good indication of
how height and weight can be used as a ratio (or index) that can directly compare
individuals.
BMI = kg/m2 where kg is a person's weight in kilograms and m 2 is their height in
metres squared.https://www.diabetes.ca/managing-my-diabetes/tools---resources/body-mass-index-(bmi)

For Adults, 18-65 years: below 18.5 (underweight); 18.5-24.9 (healthy); 25.0 or more (overweight).
Children over age 2, or teens whose BMI is (refer to graph of the US Center for Disease Control below):

Less than the 5th percentile are considered underweight.

Between the 5th percentile and less than the 85th percentile are at a healthy weight.
In the 85th percentile to less than the 95th percentile are considered overweight.
CDC.gov
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Crime Rate. A crime rate describes the number of crimes reported to law
enforcement agencies per 100,000 total population. A crime rate is calculated by dividing the
number of reported crimes by the total population; the result is multiplied by 100,000.
https://oag.ca.gov/sites/all/files/agweb/pdfs/cjsc/prof10/formulas.pdf
Crime rates reflect the risks in a certain community, regardless of municipality,
region, or even country.
Violent Crime Rate Per 100,000 Inhabitants in 2006 (Top 10 States)
Violent Crime
Rank State
Rate
1 District Of 1,508.4
Columbia
2 South Carolina 765.5
3 Tennessee 760.2
4 Nevada 741.6
5 Florida 712.0
6 Louisiana 697.8
7 Alaska 688.0
8 Delaware 681.6
9 Maryland 678.6
10 New Mexico 643.2
https://www.cga.ct.gov/2008/rpt/2008-R-0347.htm

Per Capita Income.This measures the amount of disposable income per head of a
household. Per Capita Income of a household, say per year, is total income divided by number of
family members. Using per capital income, it is easier to approximate how families cope with their
socio-economic needs.

Mortality Rate.

Return on Investment.

Mileage per Liter of Fuel.