SIMPLE
INTEREST
Since this section involves what can
happen to your money, it should be of
INTEREST to you!
Objectives:
At the end of the lesson, the learner is able to compute
interest, maturity value and present value in simple
interest environment and solve problems involving
simple interest.
IMPLE INTEREST
DEFINITION
Interest paid on the principal only
and NOT on any accumulated interest
IMPLE INTEREST
FORMULA
Interest paid Annual interest rate
I = PRT
s
Time (in years)
Principal
(Amount of
money invested
or borrowed)
Using the formula in simple interest, complete the
table by finding the unknown:
If you invested ₱2,000.00 in an account that paid
simple interest of 4%, find the interest earned after
𝟏
1 years.
𝟐
I = PRT
I = (2,000)(0.04)(1.5)
I = ₱ 120
2. A bank offers 0.25% annual simple interest rate for a
particular deposit. How much interest will be earned if 1
million pesos is deposited in this savings account for 1
year?
Solving for Time
Example 1.
If you invested ₱300.00 in an account that paid
simple interest, find how long you’d need to
leave it in at 4% interest to make ₱15.00.
enter in formula
as a decimal I = PRT
15 = (300)(0.04)T
1.25 yrs = T
Example 2.
The interest on a loan of ₱ 1,800 is ₱20. If
the rate of interest is 5%, when is the loan
due?
𝐼
Given: t= t = 0.22 years
(1,800)(0.05)
P = ₱ 1,800
I = ₱20 or 0.22 years x 12months = 2.64 months
R = 5%
Req’d: t or 0.22 x 365 days = 80.3 days
Example 3.
How long will it take ₱ 305,000 to earn ₱ 325 at
4% ?
Solving for Principal
Example:
When invested at an annual interest rate of 7%, an amount earned
₱ 11,200 of simple interest in two years. How much was originally
invested?
Example 2:
If a nine-month term deposit at a bank a simple interest
rate of 9% per annum, how much will have to be deposited
to earn ₱ 225 of interest?
Given:
t= 9 months or 0.75 years
r = 9% or 0.09
I = ₱ 225
𝐼 225 P =₱ 3,333.33
P= P=
𝑟𝑡 (0.09)(0.75)
Example 3:
The repayment on a loan was ₱13,670. If the loan was
for 15 months at 12% interest a year, how much was
the principal?
Solving for Rate
Example:
If an entrepreneur applies for a loan amounting to ₱ 500,000 in a bank,
the simple interest of which is ₱ 157,500 for 3 years, what interest rate
is being charged?
Example 2:
The interest on a loan of ₱ 2,500 is ₱ 60. If the loan is to be paid
after 180 days, what is the rate of interest charged?
Given: Solution:
P = ₱ 2,500 𝑰
r=
𝑷𝒕
I = ₱ 60
𝟏𝟖𝟎
t= r=
𝟔𝟎
𝟑𝟔𝟓 (𝟐𝟓𝟎𝟎)(𝟎.𝟒𝟗)
Req’d: r r = 0.049 or 4.9%
Example 3
Interest of ₱1,904 was charged on a loan of ₱6,800 for 4
years. What simple annual rate of interest was charged on
the loan? Solution:
Given:
𝑰
I = ₱1,904 r=
𝑷𝒕
P = ₱6,800
t = 4 years 𝟏,𝟗𝟎𝟒
r=
𝟔𝟖𝟎𝟎 (𝟒)
r = 0.07 or 7%
Maturity Value / Future Value
The Value of an asset at a specific date or
amount after t years
Variables for Maturity Value
Future Value
Amount
Calculating Maturity Value / Future
Value
or
Example
If you invested ₱200.00 in an account that paid simple
1
interest of 4%, find the maturity value after 1 years.
2
Example
If you invested ₱200.00 in an account that paid
simple interest of 4%, find the maturity value
1
after 1 years.
2
FV = Principal + Interest
FV = P + I
FV = P + PRT
FV = 200 + (200)(.04)(1.5)
FV = 200 + 12
FV = ₱ 212
Example 2.
Find the maturity value if 1 million pesos is deposited in a bank at an annual
simple interest rate of 0.25% after
a. 1 year
b. 5 years b. Maturity after 5 years
Is = PRT
Is = 1,000,000(0.0025)(5)
Given : P = 1,000,000 Is = ₱ 12,500
r = 0.25% = 0.0025
F = P + Is
F = 1,000,000 + 12,500
a. Maturity or future value F F = ₱ 1,012,500
after 1 year
F = P (1 + rt)
F = 1,000,000 (1 +0.0025(1))
F = ₱ 1,002,500
Example 3.
Angel deposited ₱ 20,000 in a bank that pays 0.5% simple
interest. How much will be her money after 6 years?
Answer:
₱ 20,600
