MATH1a-Finals-Lesson-2
MATH1a-Finals-Lesson-2
MATH1a-Finals-Lesson-2
FINANCE
SIMPLE INTEREST
Interest is the cost for the use of
money.
For example,
I = Prt, where
I is the amount of interest,
P is the principal amount,
r is the rate of interest that must be
expressed in decimal, and
t is the time.
Simple Interest
Example:
You have deposited Php 5,000 in a
Savings Bank on May 25, 2022 with an
interest rate of 3% and have withdrawn
it on May 25, 2023. Calculate the simple
interest.
Simple Interest
Example:
I = Prt
I = Php 150
Simple Interest
Example:
A loan of Php 3,000 bears an interest
rate of 2% per month. If the loan shall
be paid in 4 months, how much is the
interest?
Simple Interest
Example:
Solution: In this example, Php 3,000 is the principal
amount (P), 2% is the interest rate (r), and the time (1) is 4
since the interest rate is monthly.
Calculate the interest.
I = Prt
I = (Php 3,000) (0.02)(4)
I = Php 240
Simple Interest
Example:
Your savings deposit of Php 7,000 earns
a simple interest of 5%. How much is the
interest for 9 months?
Simple Interest
Example:
Solution: Here, Php 7,000 is the principal (P), 5% is the
interest rate (r), and the time (t) is 9/12. It is 9/12 since the
interest rate is annual, and the duration of the savings is 9
months. Calculate the interest.
I = Prt
I = Php 262.50
Simple Interest
Note:
The time shall be measured in the same
period as the interest rate. Now if the
interest rate is annual and the time is in
days, we need to express the time as a
fractional part of a year. We can use either
the exact method or the ordinary
method.
Simple Interest
Note:
In exact method,
t = (number of days/ 365)
while in ordinary method
t = (number of days / 360)
In most businesses, ordinary method is
used unless otherwise stated.
Simple Interest
Example:
Calculate the simple interest due on a
72-day loan of Php 3,000 if the annual
interest rate is 4%.
Simple Interest
Example:
Solution: We will substitute the following values in
the simple interest formula:
P=Php 3,000, r = 4%, and t = 72/360.
Simple Interest
Principal Amount
Interest rate
Time / Duration
Seatwork/Activity
Compute the simple interest earned. Round off to the nearest
peso.
P r t I