General Mathematics
BASIC CONCEPT OF
SIMPLE INTEREST
Basic Concept of Simple
Interest
Lesson Objectives
◦define simple interest:
◦compute simple interest using actual and
approximate time;
◦compute ordinary and exact interest; and
◦Solve application problems involving simple
interest.
Let’s Explore
Your family wants to buy a new flat tv but you
don’t have enough savings to pay for it. How can
your family have the desired television?
1. How do credit card companies make money
from their services?
2. How do banks, credit cooperatives, or
appliances centers make money from their
clients?
Concept Check
◦Interest is the payment for the use of one’s
money.
◦Simple Interest is computed using either actual
or approximate time.
◦Actual time is the sum of the exact number of
days of each month.
◦Approximate time is computed using 30 days of
each month in a year.
The Simple Interest
◦Simple Interest on the amount invested or
borrowed is computed based on the principal,
interest rate, and length of time for which the
money is invested or borrowed. The formula for
the simple interest is
𝐼 =𝑃𝑟𝑡
Notations and Definition of
Terms
Notatio
n
Terminology Definition
I Interest The payment for the use of
borrowed money or the amount
earned on invested money.
P Principal The amount borrowed or invested.
r Rate of A fractional part of the principal that
Interest is paid on loan or investment
t Time The number of years for which the
money is borrowed or invested
F Final amount The sum of the principal and interest
or maturity earned within the time
value
Formulas in solving problems
involving simple
Required
interest
Formulas
Interest ( I ) I = Prt
Final Amount (F) F=P+I
F = P( 1 + rt)
Principal (P) or P = F – I
Time ( t )
Rate of interest ( r )
Illustrative examples
◦Task 1
How much interest will Mary earn in her
investment of Php 12, 400 at 6% simple
interest for 3 years?
Illustrative examples
◦Task 2
Sophia borrowed Php 25,000 from a lending
corporation that charges 12% interest with an
agreement to pay the principal and the interest
at the end of the term. If she paid Php 35, 500 at
the end of the term, for how long did she use the
money ?
Illustrative examples
◦Task 3
Julianne needs Php 57,300 to buy cooking
equipment for her new house. She is willing to
pay the interest of
Php 7,735.50 if she borrowed the said amount
from the bank. If she intends to pay her
obligation within 30 months, what must be the
interest rate of her loan?
Illustrative examples
◦Task 4
Ian wishes to have Php 36, 500 after 1 year
and 3 months to be used for their educational
tour. How much should he invest in his account
today if the interest rate is 6.5 %?
Illustrative examples
◦Task 5
To finance her new business, Faith borrowed
Php 124, 000 from her brother with an
agreement to pay the amount together with the
interest at the end of 4 years and 9 months at
2.24% interest rate. How much did Faith pay her
brother?
Ordinary and Exact Interest
◦The formula for ordinary and exact interests are
given
Ordinary Interest:
Exact Interest:
Task 6
How much interest will Benny earn if he deposits
an amount of Php 37,500 at 3% interest rate for
235 days and decided to deposit it at
a) Ordinary interest?
b) Exact interest?
c) Compare the two results.
Task 7
Mrs. Santiago plans to purchase a new laptop for
her daughter by making a loan of Php 51,000
from a bank that charges 11.75% interest rate.
How much did she pay the bank after 169 days
using exact interest?
Task 8
Lorie borrowed Php 23,000 from XYZ Cooperative
that charges 7% interest rate for 298 days?
a) How much interest will Lorie pay?
b) How much will Lorie pay the cooperative at
the end of 298 days?
◦Reference:
Aoanan, Grace O. et. al. (2018) General
Mathematics for
Senior HS, C&E Publishing, Inc.