G E N E R A L

M A T H E M A T I C S
SECOND QUARTER
GOALS
• Define simple and
compound interest
• Identify the formulas to be
used in simple and
compound interest
• Solve problems involving
simple and compound
interest.
 Interest
For every financial transaction, whether a loan or an
investment, a certain amount is charged to the
borrower. This amount is called Interest.
The concept of Interest is usually present in loans,
credit cards, investments, and bank accounts.
Types of Interest
• Simple Interest
• An interest charged only on loan/invested amount called
the Principal.
• Compound Interest
• A type of interest where the interest due at the end of a
certain period is added to the principal and that sum
earns interest for the next period.
Simple Interest
To solve for the Simple Interest, multiply the principal, the
rate of interest, and the time in years.
𝑰 = 𝑷𝒓𝒕
Where:
𝐼 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡,
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙,
𝑟 = 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡,
𝑡 = 𝑡𝑖𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠
Principal or Present Value is the amount borrowed or
invested.
Simple Interest
Future Value/Maturity Value is the total amount at the
end of the term with interest, thus, to compute for this we
simply have to add the Principal and the interest.
𝑨=𝑷+𝑰
Where:
𝐴 = 𝐹𝑢𝑡𝑢𝑟𝑒 𝑉𝑎𝑙𝑢𝑒 𝑜𝑟 𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑉𝑎𝑙𝑢𝑒,
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙,
𝐼 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Example:
Jessa made a loan of Php 19,450 from a bank that charges 4% simple
interest. How much will be her interest after 3 years?
Example:
Jessa made a loan of Php 19,450 from a bank that charges 4% simple
interest. How much will be her interest after 3 years?
Given: Solution:
𝑃 = 19,450 𝐼 = 𝑃𝑟𝑡
𝑟 = 4% 𝑜𝑟 0.04 𝐼 = (19,450)(0.04)(3)
𝑡 = 3 𝑦𝑒𝑎𝑟𝑠 𝐼 = 2,334

Answer: Jessa would have to pay an interest of Php 2,334.

Example:
Teresa borrowed Php 120,000.00 from her friend to fund her business.
She agreed to pay an 8% annual simple interest rate for 2 years. How
much should she pay her friend in total at the end of 2 years?
Example:
Teresa borrowed Php 120,000.00 from her friend to fund her business.
She agreed to pay an 8% annual simple interest rate for 2 years. How
much should she pay her friend in total at the end of 2 years?
Given: Solution:
𝑃 = 120,000 𝐼 = 𝑃𝑟𝑡
𝐼 = (120,000)(0.08)(2)
𝑟 = 8% 𝑜𝑟 0.08
𝐼 = 19,200
𝑡 = 2 𝑦𝑒𝑎𝑟𝑠 𝐴 =𝑃+𝐼
𝐴 = 120,000 + 19,200
𝐴 = 139,200
Answer: Teresa would have to pay a total of Php 139,200 at the
end of 2 years.
Example:
Rhea paid an interest of Php 810 on a simple interest loan of
Php18,000 at the end of 1 year and 6 months. What is the rate of the
interest charged?
Example:
Rhea paid an interest of Php 810 on a simple interest loan of
Php18,000 at the end of 1 year and 6 months. What is the rate of the
interest charged?
Given: Solution:
𝑃 = 18,000 𝐼 = 𝑃𝑟𝑡
810 = 18,000 𝑟(1.5)
𝐼 = 810 810
𝑡 = 1.5 𝑦𝑒𝑎𝑟𝑠 =𝑟
(18,000)(1.5)
𝑟 = 0.03

Answer: Rhea was charged at an interest rate of 3%.

Example:
Jane paid an interest of Php 1,218.75 after 9 months for an amount
she borrowed. How much did she borrow if the simple interest rate
was 6.5%?
Example:
Jane paid an interest of Php 1,218.75 after 9 months for an amount
she borrowed. How much did she borrow if the simple interest rate
was 6.5%?
Given: Solution:
𝐼 = 1,218.75 𝐼 = 𝑃𝑟𝑡
1,218.75 = 𝑃(0.065)(0.75)
𝑟 = 6.5% 𝑜𝑟 0.065 1,218.75
𝑡 = 0.75 𝑦𝑒𝑎𝑟𝑠 (0.065)(0.75)
=𝑃
𝑃 = 25,000

Answer: Jane borrowed Php 25,000.

Chris needs to have Php 500,000 in 5 years for the down payment of
his dream car. How much should he invest in an account that earns
6% simple interest to reach his goal?
Ordinary Interest and Exact Interest

•Ordinary Interest – 360-day calendar

•Exact Interest – 365-day calendar
Example:
Joe borrowed Php 15,000 to buy a new automatic washing machine.
He is charged a 6% simple interest rate and agreed to pay back the
loan at the end of 120 days. How much ordinary interest would he pay
for the loan?
Example:
Joe borrowed Php 15,000 to buy a new automatic washing machine. He is
charged a 6% simple interest rate and agreed to pay back the loan at the
end of 120 days. How much ordinary interest would he pay for the loan?

Given: Solution:
𝑃 = 15,000 𝐼 = 𝑃𝑟𝑡
120
𝑟 = 6% 𝑜𝑟 0.06 𝐼 = (15,000)(0.06)
120 360
𝑡= 𝑦𝑒𝑎𝑟𝑠 𝐼 = 300
360

Answer: Joe would have to pay an interest of Php 300.

Example:
Kyla borrowed Php 55,000 to buy a new laptop for online class. She is
charged a 5.2% exact interest rate and agreed at to pay back to loan
at the end of 180 days. How much would she pay in total at the end of
180 days?
Example:
Kyla borrowed Php 55,000 to buy a new laptop for online class. She is
charged a 5.2% exact interest rate and agreed at to pay back to loan at the
end of 180 days. How much would she pay in total at the end of 180 days?

Given: Solution:
𝑃 = 55,000 𝐼 = 𝑃𝑟𝑡
180
𝑟 = 5.2% 𝑜𝑟 0.052 𝐼 = (55,000)(0.052)
180 365
𝑡= 𝑦𝑒𝑎𝑟𝑠 𝐼 = 1,410.41
365 𝐴 = 55,000 + 1,410.41
𝐴 = 56,410.41
Answer: Kyla would have to pay a total of Php 56,410.41.
Compound Interest
Compound Interest is computed every compounding period whose
principal amount includes the interest earned every end of the
compounding period.
The formula for the Maturity Value for Compound Interest is,
𝒓 𝒏𝒕
𝑨=𝑷 𝟏+
𝒏
Where:
𝐴 = 𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑉𝑎𝑙𝑢𝑒 𝑟 = 𝑟𝑎𝑡𝑒 𝑡 = 𝑡𝑖𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠
𝑛 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑/𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟
Compounding period
The compounding period can be,
• Annually – every year, once a year (n=1)
• Semi-annually – every 6 months, twice a year (n=2)
• Quarterly – every 3 months, four times a year (n=4)
• Monthly – every month, twelve times a year (n=12)
Example:
Ana plans to invest Php 250,000 for the college fund of her son. The
bank offers an annual interest rate of 4.3% compounding quarterly. If
she will not withdraw any amount for 5 years, how much money will
be in her account after 5 years?
Example:
Ana plans to invest Php 250,000 for the college fund of her son. The bank
offers an annual interest rate of 4.3% compounding quarterly. If she will
not withdraw any amount for 5 years, how much money will be in her
account after 5 years?
Given: Solution:
𝒓 𝒏𝒕
𝑃 = 250,000 𝑨=𝑷 𝟏+
𝑟 = 4.3% 𝑜𝑟 0.043 𝒏
4(5)
0.043
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠 𝐴 = 250,000 1 +
4
𝑛=4 𝐴 = 309,610.02

Answer: Ana would have a total of Php 309,610.02 in her account

after 5 years.
Example:
How much must be deposited today at an account that offers an
annual interest rate of 7% compounding monthly if you need Php
30,000 in 3 years?
Example:
How much must be deposited today at an account that offers an annual interest rate of 7%
compounding monthly if you need Php 30,000 in 3 years?

Given:
Solution:
𝒓 𝒏𝒕
𝐴 = 30,000 𝑨=𝑷 𝟏+
𝑟 = 7% 𝑜𝑟 0.07 𝒏
12(3)
𝑡=3 0.07
𝑛 = 12 30,000 = 𝑃 1 +
12
30,000
12(3)
=𝑃
0.07
1+
12
𝑃 ≈ 24,332.37
Answer: You need to deposit Php 24,332.37 to have Php 30,000 in 3
years.
SEATWORK 1:
1. BOOK: P. 70, A. Complete the table

2. How much must be deposited today at an account that offers an

annual interest rate of 8% compounding monthly if you need Php
20,000 in 5 years?