Department of Education

Region III
DIVISION OF MABALACAT CITY

Name: __________________________________ Grade & Strand: ________________

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LEARNING ACTIVITY SHEET

ABM 11 BUSINESS MATHEMATICS (Q1-WK8)
Interest

I. Introduction

People still see a need for money but borrowing money is expensive.
Different charges, different amounts, usually they charge this way at various
times. It is called Interest. It is the amount you pay by using credit card or
taking out a loan.

This learning activity will help you understand how interest is measured,
and help you be more educated in decision making when borrowing and
saving using credit card. Math is a lot of fun! Enjoy learning!

II. Learning Competency

This Learning Activity Sheets was designed and written with you in mind
.This will help you to compute interest specifically as applied to mortgage,
amortization, and on services/utilities and on deposits and loans.
ABM_BM11BS-Ij-10.

III. Objectives
After going through this Learning Activity Sheets, you are expected to
1. discuss and define simple interest and maturity value;
2. differentiate and calculate for ordinary interest from exact interest;
3. convert interest rate per year to equivalent monthly rate and vice
versa;

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 4. compute interest using unpaid balance method; and
5. solve problems related to interest from monthly installment payments.

IV. Discussion

Simple Interest and Maturity Value

The fee on the privilege of borrowing money is called INTEREST. In loans, it

may be considered as an expense on the part of the borrower or debtor and
may be regarded by the lender or creditor as income.

Typically, banks or credit firms issue short and long-term loans or

transactions. Short-term loans are good for one day or up to one year,
whereas long-term loans are good for more than one year.

We use I = PRT for calculating the simple interest, where P is the principal,
R annual interest rate, and T interest period (in years).

From the equation I = PRT, we arrive for P = I R (T), for R = I P (T) and
lastly for T = I P (R).

The maturity value M that the lender receives from the debtor on the date
of maturity of the loan shall be equal to the sum of principal P and simple
interest I. That is, we have

M=P+I

Since I = PRT, we get M = P + PRT = P (1 + RT)

For example:

1. Joanna borrowed an amount of Php100,000.00 from Tagum Cooperative

at an interest rate of 2% to finance renovation of her house. How much is
the interest if her due date is October of this year?

Given: P = Php100,000 R = 2% = 0.02 T = 1 year

Solution: I = PRT
= 100,000(0.02)(1)
= Php2,000

2. Find the maturity value of a loan of Php8,000.00 borrowed at an interest

rate of 15% if it has to be repaid for 15 months.

Solution: M = P (1 RT)
= Php8,000 [1 ( )(15) ]
= Php9,500

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Convert each rate

For example: Convert the following rate to equivalent monthly rate and
equivalent annual rate.

a. 14% per year to the equivalent monthly rate.

b. 2.5% per month to equivalent annual rate.

Solution:

a. Divide the annual rate by 12 to obtain the equivalent monthly rate.

14 12 = 1.17% monthly
b. Multiply the monthly rate by 12 to get the equivalent annual rate.
2.5 12 = 30% annually

Ordinary Interest and Exact Interest

If the loan term is given as a certain number of days, we can divide the
number of days by 365 days or 360. When the divisor is 360, we are
applying Ordinary Interest, which is still used by many companies today.

Banks and other credit unions are using the Exact Interest in which 365 is
used as a divisor.

We substitute the I = PRT formula, where T is expressed in days, as follows:

For Ordinary Interest

I = P [R 360] (T), where we get for

P = [I÷ {(R 360)} (T)],

for R= I ÷ [(T÷360) (P)] and we get

T = I ÷ [(R ÷ 360) (P)].

For Exact Interest

I = P [R 365] (T), where we get for

P = [I÷ {(R (365)} (T)],

for R= I [(T÷365) (P)] and we get

T = I ÷ [(R ÷ 360) (P)].

Example:

1. Eloisa wants to know which credit company provides lower interest at the
same interest rate of 7% if she decides to borrow a quick cash of
PHP60,000.00 for 180 days. Company A uses the ordinary method of

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interest to compute interest while Company B uses the exact interest
method. What firm should she choose?

Solution:

In Ordinary Interest,

I = P [R/360] (T)
= 40,000 (0.07/360) (180)
= Php1,400

In Exact Interest,

I = P [R/360] (T)
= 40,000 (0.07/365) (180)
= Php1,380.82

Eloisa would borrow money from Company B, as the interest is lower than
Company A at the same interest rate.

Finance Charges on Unpaid Balance

The finance charges on the unpaid balance each month is the general
principle of charging for transactions by credit card.

Example: Rica bought fossil watch using a credit card at a price of

Php10,400.00 payable in four months at 10% interest. The principal is also
repaid equally each month with four payments of Php2,600.00 each.
Calculate for the total interest when it is paid equally over four months.

Solution: I = PRT

= 10,400 (0.10) (4/12) = Php346.67

Thus, the total interest is Php346.67.

346.67 4 = Php86.67 per month for interest.

The summary of computations is provided by the table below.

Month Unpaid Monthly Principal Total New

Balance Interest Payment Payment Balance
1 Php10,400 Php86.67 Php2,600 Php2,686.67 Php7,800
2 7,800 86.67 2,600 2,686.67 5,200
3 5,200 86.67 2,600 2,686.67 2,600
4 2,600 86.67 2,600 2,686.67 0
TOTAL Php120 Php10,400 Php10,746.68

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In the case of a credit sale, the buyer can pay the purchase price and the
credit charges for monthly payments called INSTALLMENTS. Here are the
basic terms in finding for the amount financed, installment price and
instalment loan.

1. Cash price- it is the price paid at the time of purchase

2. Down payment-is the initial partial payment in buying goods.
3. Amount financed-it is the total amount charged usually done in regular
payments to pay off the balance.
4. Finance charge- it includes the interest and any costs associated with an
installment loan.
5. Installment price- it is the sum of all installment payments, finance
charge if any and down payment made.

For example:

1. SGD Inc. purchased a printer for their department on an installment plan

with Php1,000.00 down payment and 10 payments of Php1,500.00. Find the
installment price of the printer if there’s an additional finance charge of
Php100.00.

Solution: I.P = total of installment payments + D.P + finance charge

= 10(1,500) + 1,000 + 100 = Php16,100

2. The installment price of a cell phone is Php10,000 for a 5-month loan of a

down payment of Php1,500 was made, how much is the installment
payment?

Solution: We compute the amount financed by subtracting the D.P from the
installment price.

Amount Financed = Installment Price – Down Payment

= 10,000 – 1,500 = Php8,500

Installment payment = Php8,500/5 = Php1,700

V. Activities

Activity # 1: Check for missing variable

Find the missing variable using Ordinary Interest Method. Write your
answer on each number. Use another sheet of paper for your solution.
Round off your percentage and peso to two decimal places.

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 Principal Rate Time Interest
Php5,000 15% 60 days (1)
Php2,500 (2) 90 days Php50
Php6, 620 20% 90 days (3)
Php1,900 (4) 120 days Php80
Php7,000 10% 90 days (5)
Php6,500 15% 40 days (6)
Php8,000 25% 60 days (7)
Php3,900 (8) 135 days Php250
Php2,800 10% 90 days (9)
(10) 15% 180 days

Activity # 2: Complete the missing variable

Find the missing variable using Exact Interest Method. Write your answer
on each number. Use another sheet of paper for your solution. Round off
your percentage and peso to two decimal places.

Principal Rate Time Interest

Php1,950 6% 90 days (1)
(2) 8% 125 days Php250
Php10,400 25% 160 days (3)
Php825 20% 120 days (4)
(5) 7% 75 days Php90
Php5,480 10% 65 days (6)
Php5,000 15% 60 days (7)
Php20,000 15% 90 days (8)
Php4,600 10% 60 days (9)
Php7,000 20% 40 days (10)

Activity # 3: Convert each rate

Complete the table below for the equivalent monthly rate and equivalent
annual rate. Round off your answer to percentage.

Month Rate Annual Rate

(1) 16%

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1.25% (2)
1.5% (3)
(4) 18%
0.75% (5)
(6) 20%
20% (7)
1 ½% (8)
(9) 25%
(10) 17%

Activity # 4: Calculate for the unpaid balance

Analyze the problem. Compute for the missing part. Use another sheet of
paper for the solution. Write your final answer on the box.

Unpaid Monthly Principal Total New

Month Balance Interest Payment Payment Balance
1st month Php6,000 (1) Php1,500 (2) (3)
2 month
nd 4,500 (4) 1,500 Php1,575 (5)
3rd month 3,000 (6) 1,500 1,575 (7)
4th month 4,500 (8) 1,500 1,575 (9)
Total (10) Php6,000 Php6,300

Activity # 5: Solve the problem

Solve the following problems for computing interest. Write your solution on
another sheet of paper. Round off your peso to two decimal places.

1. If the interest amount is Php300.00 at 9% interest rate for 60- day loan,
using the exact interest method, how much is the principal amount?

2. Anna bought a new food blender on an instalment plan. She made a down
payment of Php1,500.00. How much is the installment payment if the
installment price of the food blender for a 6 month loan was Php4,860.00?

3. Find the installment price of a digital camera if there’s an additional

charge of Php500.00 in an installment plan with Php1,000.00 down
payment and 6 payments of Php1,500.00.

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4. The installment price of a refrigerator is Php7,500.00 for a 12 month
loan, of a down payment of Php1,000.00 was made, how much is the
installment payment?

5. Compute the interest of a credit purchase of Php40,000.00 at 10% for a 6

months.

6. Find the monthly value of a loan of Php4,000.00 borrowed at an interest

rate of 25% if it has to be repaid for 16 months.

7. A bank offers 7% interest rate for a particular deposit. How much interest
will be earned if Php500,000.00 is deposited in this savings account for a
year?

8. How much interest is charged when Php10,000.00 is borrowed for 120

days using ordinary interest method at interest rate of 10%?

9. Find the maturity value of Php20,000.00 if deposited in a bank at an

interest rate of 15% after 18 months.

10. How much is the interest of Php20,000.00 principal amount at 12%

interest rate for 5 years?

VI. Assessment

A. Multiple Choice. Read the following problems. Encircle the letter of the
correct answer.

1. Using Exact Interest Method, how much is the interest for Php6,000
loan 60 days at 6% interest rate?
A. Php800 B. Php600 C. Php700 D.Php900

2. Find the maturity value of a loan of Php50,000 at 15% interest rate

for 15 months.
A. Php150,000 B. Php112,500 C. Php69,495 D. Php59,375

3. How much is the interest if the principal amount is Php2,000 at 5%

interest rate for 3 years?
A. Php3,000 B. Php250 C. Php260 D. Php2,000

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 4. Fashion 26 Inc., purchase an office desk for their department on an
installment plan with Php2,000.00 down payment and 12 payments of
Php3,000.00. Find the installment price of the printer if there’s an
additional finance charge of Php5,300.00.
A. Php36,200 B. Php38,300 C. Php38,000 D. Php30,000

5. Convert 18% per year to the equivalent monthly rate.

A. 1.5% B. 2.5% C. 30% D. 2.16%

6. Convert 2.4% per year to the equivalent annual rate.

A. 28.8% B. 20% C. 0.80% D. 14.4%

7. If a business owner applies for a loan of Php500,000.00 in a bank, the

interest amount is Php141,500.00 for 3 years, what interest rate is
being charge?
A. 9% B. 9.23% C. 9.43% D. 9.53%

8. How much money was originally invested when the amount earned
Php10,200.00 interest amount is invested at interest rate of 7% for 2
years?
A. Php10,280.14 C. Php72,857.14
B. Php20,457.14 D. Php70,000

9. Shella Marie has a loan with an interest rate of 15%. The amount of
her loan is Php60,000.00 for a period of 10 months. How much is her
interest using ordinary interest method?
A. Php675,000 B. Php120,000 C. Php2,900 D. Php1,875

10. Compute the interest on a credit purchase of Php15,000.00 at 15%

for 6 months.
A. Php375 B. Php750 C. Php4,500 D. Php5,500

VII. Reflection

How can students like you, apply this kind of learning?

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VIII. Reference

Books

Dagal, Keneth Adrian P., Martin-Lundag, Leah C., Lopez, Brian Roy C.,
Business Math 1253 G. Arneta Avenue, Quezon City, by Vibal Group, 2016.

Website

https://opploans.com

https://mathisfun.com

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1. B 1. Php20,277.7 1. Php75
2. D 8 2. Php1,575
3. A 2. Php560 3. Php4,500
4. B 3. Php10,500 4. Php75
5. A 4. Php541.67 5. Php3,000
6. A 5. Php2,000 6. Php75
7. C 6. Php5,333.33 7. Php1,500
8. C 7. Php35,000 8. Php75
9. D 8. Php333.33 9. 0
10.A 9. Php24,500 10.Php300
10.Php12,000
Assessment Activity 5 Activity 4
1. Php28.85 1. Php125
1. 1.33%
2. Php9,125 2. 8%
2. 15%
3. Php1,139.73 3. Php331
3. 18%
4. Php54.25 4. 12.63%
4. 1.5%
5. Php6,257.14 5. Php175
5. 9%
6. Php97.59 6. Php379.17
6. 1.67%
7. Php123.29 7. Php333.33
7. 0.2%
8. Php739.73 8. 17.09%
8. 18%
9. Php75.62 9. Php70
9. 2.08%
10.Php153.42 10. Php8,000
10.1.42%
Activity 3 Activity 2 Activity 1
IX. Answer Key
X. Development Team

Development Team of the Learning Activity Sheets

Writer: Jonalyn S. Galang

Editor: Baby Lala B. Tan / Anthony Rayley M. Cabigting, DEM
Reviewer: Kevin Junior P. Gomez, MBA
Illustrator:
Layout Artist:
Management Team: Edgard C. Domingo, PhD CESO V
Leandro C. Canlas, PhD, CESE
Elizabeth O. Latorilla, PhD
Sonny N. De Guzman, EdD
Elizabeth C. Miguel, EdD

For inquiries or feedback, please write or call:

Department of Education – Division of Mabalacat

P. Burgos St., Poblacion, Mabalacat City, Pampanga

Telefax: (045) 331-8143

E-mail Address: mabalacatcity@deped.gov.ph

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