NAGA COLLEGE FOUNDATION, INC

COLLEGE OF ARTS AND SCIENCES

SIMPLE &
COMPOUND
INTEREST
M MW
\
I N T E R E S T
Financial
Transaction
Financial
Transaction
INVESTOR
- who is lending money to
someone (debtor).
Financial
Transaction
INVESTOR
- who is lending money to
someone (debtor).
DEBTOR
- who is borrowing money
from the investor.
INTEREST
sum of money received or
paid for the use of
someone else’s money.
Simple
Interest
SIMPLE INTEREST
- interest earned at the end of the allotted
time between the lender and the borrower
@reallygreatsite
SIMPLE INTEREST
- interest earned at the end of the allotted
time between the lender and the borrower
@reallygreatsite
SIMPLE INTEREST
- interest earned at the end of the allotted
time between the lender and the borrower
@reallygreatsite

I = Prt
SIMPLE INTEREST

I = Prt
@reallygreatsite

I = simple/amount of interest
P = principal amount
r = rate of interest
t = time
 Maturity Value
• Also called as “future value”
@reallygreatsite or “accumulated value”
• Denoted as symbol ‘F’
• the total amount when the
principal is added to the
interest
 Maturity Value
• Also called as “future value”
@reallygreatsite or “accumulated value”
• Denoted as symbol ‘F’
• the total amount when the
principal is added to the
interest
MATURITY VALUE

F=P+I
@reallygreatsite
F = maturity value
P = principal amount
I = simple/amount of Interest
MATURITY VALUE

F = P(1+rt)
@reallygreatsite
F = maturity value
P = principal amount
r = rate of interest
t = time
 Maturity Value

• F = P+I
@reallygreatsite

• F = P (1+rt)
SIMPLE INTEREST
FORMULAS
• Finding Simple Interest: 𝑰 = 𝑷𝒓𝒕
𝑰
• Finding Principal
@reallygreatsiteAmount/ Original Loan: 𝑷 =
𝒓𝒕
𝑰
• Finding Rate of interest: 𝒓 = 𝑷𝒕
𝑰
• Finding Time: 𝒕 =
𝑷𝒓
• Finding Maturity Value/Future Value/Accumulated
Value: 𝑭 = 𝑷 + 𝑰 or 𝑭 = 𝑷(𝟏 + 𝒓𝒕)
 EXAMPLE:
AAman
mandeposited ₱50,000
deposited ₱50,000 at 1.25%
at 1.25% for 1for 1 year. Find
year.
the simple
Find interest
the simple and
interest the
and thematurity value.
maturity value.
 EXAMPLE:
AAman
mandeposited ₱50,000
deposited ₱50,000 at 1.25%
at 1.25% for 1for 1 year. Find
year.
the simple
Find interest
the simple and
interest the
and thematurity value.
maturity value.
Mia Benson invested her summer earnings of
₱3,000 in a savings account which pays 2.5%
interest. How much will this amount to in 6
months?

@reallygreatsite
Mia Benson invested her summer earnings of
₱3,000 in a savings account which pays 2.5%
interest. How much will this amount to in 6
months?

@reallygreatsite
How many months will it take ₱15,000 to
earn ₱56.25 at 1.5% simple interest rate?
How many months will it take ₱15,000 to
earn ₱56.25 at 1.5% simple interest rate?

@reallygreatsite
Mr. Jan borrowed P200,000 from his company, If
he paid an interest of P37,000 for one and a half
years, what is the rate of interest?
Mr. Jan borrowed P200,000 from his company, If
he paid an interest of P37,000 for one and a half
years, what is the rate of interest?

@reallygreatsite
How much was borrowed if a simple interest
rate of 2.10% was offered payable in 4 months
with interest of ₱35,000?

@reallygreatsite
 If Ms. Karla paid an interest of P3,000 for a loan
obtained at 9% per annum for eight months, what
is the original loan?

@reallygreatsite
Ms. Marie obtained a loan of P50,000
from the GSIS. If the total interest of the
load was P19,500 at 9.75% per year, how
long was the loan?

@reallygreatsite
Compound
Interest
COMPOUND INTEREST
- interest earned on previously earned interest
added to the principal.
@reallygreatsite
- present value will be used instead of principal
 Maturity Value of
Compound Interest

A=
@reallygreatsite
P(1+r/n)nt
A = Accured/ Accumulated Value
P = Principal Interest
r = Rate of interest
n = number of times the interest is
compounded in a year
t = time period (in years)
EXAMPLE:
Ely Balaquiao plans to invest ₱100,000 in a business
A man deposited ₱50,000 at 1.25% for 1 year.
venture. He is offered 6% compounded semi-annually.
Findmuch
How the simple interest
will he andatthe
receive thematurity
end of 3value.
years?
EXAMPLE:
Ely Balaquiao plans to invest ₱100,000 in a business
A man deposited ₱50,000 at 1.25% for 1 year.
venture. He is offered 6% compounded semi-annually.
Findmuch
How the simple interest
will he andatthe
receive thematurity
end of 3value.
years?
To find the maturity of compound interest:

∴ The maturity value is ₱

@reallygreatsite
A ₱1,000,000-trust fund was set up and to be
used by an 8 –year old nephew when he goes to
college. In 8 years, how much will the fund be if
the investment rate is 7.5% compounded
quarterly?
An initial deposit of ₱100,000 is made into a
savings account that compounds 5% interest
annually. How much is in the account at the end
of five years?

@reallygreatsite
After 5 years of 4% interest compounded
quarterly, an account has ₱61,009.502. What was
the original deposit amount?

@reallygreatsite