BUSINESS MATHEMATICS
SIMPLE INTEREST / MORTGAGES /
COMMISSIONS AND OVERRIDES
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SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Lesson Objectives
At the end of this lesson, the students should be able to:
1. explain the role interest plays in a loan transaction;
2. compute the interest due on a loan;
3. find the maturity value on a loan or the future value on invested capital;
4. differentiate ordinary interest and exact interest, and be able to compute for the same;
5. compute for actual time and approximate time;
6. use the knowledge in (4) and (5), and compute for the four different types of simple interest;
7. be conversant with the 60-day 6% method of computing simple interest; and
8. explain the concept of promissory note.
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Lesson Objectives
At the end of this lesson, the students should be able to:
1. comprehend what a mortgage is;
2. compute for the down payment on a mortgage and the amount of the mortgage loan;
3. determine how payment is applied to interest and principal, and determine the balance of the
loan after each payment;
4. prepare an amortization table;
5. solve problems involving mortgages;
6. differentiate commission from override;
7. compute for commission earned on a particular cash sale;
8. compute for commission earned on an installment sale; and
9. solve for gross earnings involving salary, commission, and override.
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Simple Interest
Simple interest:
I = Prt
where I – interest P – principal
R – rate T – time
Future value:
F=P+I
F = P(1+ rt)
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Simple Interest
Tessa borrowed ₱2,000 at 12% interest for 2 years. Find the interest (I)
and the maturity value (F).
Given: P = ₱2,000 r = 12% t = 2 years
Interest: I = Prt
= ₱2,000 12% 2 = ₱480
Maturity value: F = P + I
= ₱2,000 + ₱480 = ₱2,480
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Actual Time and Approximate Time
Find the actual time between April 22 and August 25.
Actual time: counts the exact number of days
April has 30 days
– 22
Days in April 8
May 31
June 30
July 31
August 25
125 days
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Actual Time and Approximate Time
Find the approximate time between April 22 and August 25.
Approximate time: assumes each month has 30 days
Months Days
8 (Aug) 25 (Aug)
– 4 (April) – 22 (April)
4 months 3 days
x 30 days/mo
120 days
120 days + 3 days = 123 days
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Ordinary Interest and Exact Interest
Ordinary Interest – one year is taken as 360 days
Io = PxrxD/360
Exact Interest – one year is taken as 365 days
Io = PxrxD/365
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Ordinary Interest and Exact Interest
Compute for ordinary interest and exact interest on ₱1,000 at 8% for
90 days.
Ordinary Interest: Io = PxrxD/360
= ₱1,000 x 8% x 90/360 = ₱20
Exact Interest: Io = PxrxD/365
= ₱1,000 x 8% x 90/365 = 19.73
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Down Payment and Mortgage Loan
Assume that you wish to purchase a secondhand car worth ₱312,500 and the
seller requires a 20% down payment.
Down payment = Purchase price x Down payment %
= ₱312,500 x 20%
= ₱62,500
Mortgage loan = Purchase price – Down payment
= ₱312,500 – ₱62,500
= ₱250,000
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Term of the Loan: Total Number of
Payments
Monthly Payment:
A = ixPx(1+i)n/(1+i)n –1
where A – monthly payment
P – loan’s initial amount
i – monthly interest rate
n – total number of payments
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Monthly Payment
Loan amount: ₱250,000 Number of payment: 360
Assume that the bank will charge you 5% annually
A = ixPx(1+i)n/(1+i)n –1
= (0.00416)(₱250,000)x(1+0.00416)360 / (1+0.00416)360 – 1
= ₱1,342.05
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Amortization Table
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Plain Commission
P = BR
Commission = Sales x Commission rate
Carmen Yambao is a sales agent for the High Ace Realty. She is given a 2%
commission on her sales. For the current month, her sales was ₱1,035,000. Her
commission (which is also her gross earnings) would be:
Commission = ₱1,035,000 x 2%
= ₱20,700
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Commission and Salary
Gross Earnings = Basic Salary + Commission
Carmen Yambao’s gross earnings assuming a basic salary of ₱10,000
per month:
Gross Earnings = Basic Salary + Commission
= ₱10,000 + (₱1,035,000 x 2%)
= ₱10,000 + ₱20,907
= ₱30,907
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Commission and Salary
Eugene Tito is a sales representative earning a basic salary of ₱18,000 a month
plus 3% commission on his sales exceeding his quota of ₱15,000. Assume he
made a total sales of ₱36,000 for the current month. Find his gross earnings.
Gross Earnings = Basic Salary + Commission
= ₱18,000 + 3% (Sales – Quota)
= ₱18,000 + 3% (₱36,000 – ₱15,000)
= ₱18,000 + 3% (₱21,000)
= ₱18,000 + ₱630
= ₱18,630
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Overrides
M. Coronilia is a product manager with five sales representatives under him. The company gives
him an annual salary of ₱126,000; commission of 5% on his own sales; and an override of 12% on
his men’s sales. Find his gross earnings for the month if his total sales is ₱365,500 with his men
able to sell a total of ₱1,548,263 for the month.
Commission = 5% x his own sales
= 5% x ₱365,500 = ₱18,275
Override = 1/2% x his men’s sales
= 0.005 x ₱1,548,263 = ₱7,741.32
Basic salary = Annual Salary/12 = ₱126,000/12 = ₱10,500
Gross earnings = ₱36,516.32
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Transportation
Allowance/Representation Allowance
Emmanuel earns a basic salary of ₱12,500 per month. He earns a 3% commission on his own
sales and a 1% override on the sales of his men. In addition, he is granted a
transportation/representation allowance of ₱1,000 per month. For the current month, his men made
a total sales of ₱250,000. He made a total sales of ₱140,000. His gross earnings would be:
Gross earnings = Basic pay + Commission + Override + Allowance
= ₱12,500 + (3%x₱140,000) + (1%x₱250,000) + ₱1,000
= ₱12,500 + ₱4,200 + ₱2,500 + ₱1,000
= ₱20,200
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Commission on Sales in Installment
Basis
Assuming a sale of ₱120,000 paid in monthly installments of ₱10,000
and the commission paid is 3%.
Monthly Commission = 10,000
= ₱300
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]
Exercises
1. Tom lent ₱5,500 at 12% for 4 months. How much will he get at the end of the
term? How much interest will he earn?
2. Find the actual and appropriate time from May 8 to Nov 25.
3. What is the monthly payment on a mortgage of ₱125,000 with annual interest
rate of 6% that runs for 20 years?
4. Lara receives a basic monthly compensation of ₱12,000 and a commission on
all sales of 2%. What is her gross earnings for the month if she sold ₱150,500.
SIMPLE INTEREST / MORTGAGES / COMMISSIONS AND OVERRIDES [Link]