REPUBLIC OF THE PHILIPPINES SENIOR HIGH SCHOOL
DEPARTMENT OF EDUCATION
ROSARIO INTEGRATED SCHOOL
GENERAL
MATHEMATICS
Module 9 and
10:
Simple and
Compound Interest
Definit LOAN
ion:
An amount of money that is
borrowed for a period of time.
Definit LENDER
ion:
It refers to a person or institution
who invests the money or makes
the funds available.
Definiti BORROWER
on:
It refers to a person or institution
who owes or avail the funds from
the lender.
Definiti INTEREST
on:
It refers to the amount paid or
earned for the use of money.
Definiti PRINCIPAL
on:
It refers to the amount of money
borrowed or invested on the origin
date.
Definit ORIGIN or LOAN DATE
ion:
It is the date on which money is
received by the borrower.
REPAYMENT DATE/
Definit MATURITY DATE
ion:
It is the date on which the money
borrowed, or loan is to be
completely repaid.
Definiti TIME/TERM
on:
It is the length of time between the
origin date and maturity date. It is
expressed in years.
Definit RATE
ion:
It is the annual rate usually in
percent, charged by the lender.
MATURITY VALUE/
Definiti FUTURE VALUE
on:
It is the amount after t years that
the lender receives from the
borrower on the maturity date.
Questi
on:
What is the
difference between
simple and compound
interest?
Definiti SIMPLE INTEREST
on:
It refers to an interest that is
computed on the principal and then
added to it.
Definit COMPOUND INTEREST
ion:
It refers to the interest on the
principal amount and also on the
accumulated past interests.
Formula: SIMPLE INTEREST
𝐼 𝑠 = 𝑃𝑟𝑡 FUTURE
VALUE
𝐼𝑠 𝐹 =𝑃 + 𝐼 𝑠
𝑃=
𝑟𝑡
or
𝐼𝑠
= Simple 𝑡=
Interest
𝑃𝑟 𝐹 =𝑃 (1+𝑟𝑡 )
= Principal 𝐼𝑠
= rate 𝑟=
𝑃𝑡
= time
Example 1: Simple
Interest
A bank offers 0.35% annual simple
rate for a particular deposit. How much
interest
interest
will be earned if 1 million pesos is deposited in
this savings account for 3 years? How much will
be in the account for 3 years?
Example 2: Simple
Interest
Ronard invested ₱200,000 in a bank that
offers an annual interest rate of 6.5% for 8 years.
How much money will he have after 8 years?
Example 3: Simple
Interest
When invested at an annual interest rate of 7.5%,
the amount earned ₱15,400 of simple interest in
two years. How much money was originally
invested?
Example 4: Simple
Interest
Marco applies for a loan amounting to P350,000
in a bank. The simple interest of which is
P157,500 for 5 years. What interest rate is being
charged?
5: Simple
Interest
Example
How much interest is charged when Php 50, 000
is borrowed for 9 months at an annum rate of
10%?
Example 6: Simple
Interest
Cleo invested Php500,000 at 5% for 7 years in
investment A, and another Php500,000 at 7% for
5 years in investment B. Which of the two
investments yield a higher interest?
COMPOUND INTEREST
COMPOUND INTEREST
COMPOUNDING MORE THAN OCE A
YEAR
In computing compound interest and the
compound amounts when compounded monthly,
quarterly, semi-annually, and annually, the frequency
of conversion period increases, and the compound
interest also increases as well as the compound
Frequency of
Conversion
[Link] annually (m = 1)
[Link] semi – annually
(m = 2)
[Link] quarterly (m =
4)
[Link] monthly (m =
12)
Formula: COMPOUND
INTEREST
F- Future Value/Maturity Value
P – Principal
j-
n – total number of conversion
periods
Frequency of
Conversion
a. When the total number of conversion
periods is 36 and the term is 3 years, the
money is compounded
___________________.
b. When the total number of conversion
periods is 24 and the term is 2 years, the
money is compounded
___________________.
c. When the total number of conversion
Example 1: Compound
Interest
Allan borrows ₱50, 000 and promises to
pay the principal and interest at 12%
compounded monthly. How much must he
pay after 6 years?
Example 2: Compound
Interest
Lina is going to make investments for her
daughter’s education in 5 years’ time. If she is
going to invest her ₱30, 000 for 2.5%
compounded semi- annually for 5 years, how
much would her money be at the end of 5 years?
Compound
Interest
Example 3:
George deposit ₱15,000 into an account
paying 6% annual interest compounded annually,
how much money will be in the account after 10
years? How much is the interest earned?
Compound
Interest
Example 4:
How much should you deposit in
a bank that pays 2% compounded
annually to accumulate an amount
of ₱80, 000 in 6 years?
Compound
Interest
Example 5:
Pamela plans to invest Php400,000 in a bank for 3
years. Bank A is offering 6.5% compounded quarterly
while bank B is offering 6% compounded monthly. Which
of the two investments yield a higher interest?