SIMPLE INTEREST

LESSON 2
Prepared by: Engr. Jelz D. Genosas
 INTEREST
• Is the amount of money paid for the use of borrowed capital or the income
produced by money which has been loaned.
 SIMPLE INTEREST
𝐼 = 𝑃𝑟𝑡
Where
I – Interest
P – Principal or Present Worth
r – rate of interest
t - time
 SIMPLE INTEREST
𝐹 =𝑃+𝐼
𝐹 = 𝑃(1 + 𝑟𝑡)
Where
F – Accumulated Amount or Future Worth of money after time t
P – Principal or Present worth
I - Interest
 Ordinary Simple Interest
• Is computed on the basis of 12 months of 30 days each or 360 days a year.

1 interest period = 360 days

 Exact Simple Interest
• Is based on the exact number of days in a year, 365 days for an ordinary year
and 366 days for a leap year

1 interest period = 365 or 366 days

 Sample Problem 1
• Determine the ordinary simple interest on P700 for 8 months and 15 days if
the rate of interest is 15%.

Ans. P74.38
 Sample Problem 2
• Determine the exact simple interest on P500 for the period from January 10
to October 28, 1996 at 16% interest.

Ans. P63.83
 Sample Problem 3
• What will be the future worth of money after 14 months, if a sum of
P10,000 is invested at a simple interest rate of 12% per year?

Ans. P11,400
 Sample Problem 4
• If you borrowed money from your friend with simple interest of 12%, find
the present worth of P50,000; which due at the end of 7 months.

Ans. P46,728.97
 Sample Problem 5
• A bank charges 12% simple interest on a P300.00 loan. How much will be
repaid if the load is paid back in one lump sum after three years?

Ans. P408.00
 Sample Problem 6
• P5000 is borrowed for 75 days at 16% per annum simple interest. How much
will be due at the end of 75 days?

Ans. P5166.67
SEATWORK 1:
1. If you borrow money from your friend with simple interest of 12%, find the
present worth of P20,000, which is due at the end of nine months.
2. Kathy buys a television set from a merchant who asks P1,250.00 at the end of 60
days(cash in 60 days). Kathy wishes to pay immediately and the merchant offers
to compute the cash price on the assumption that money is worth 8% simple
interest. What is the cash price today?
3. In buying a computer disk, the buyer was offered the options of paying P250
cash at the end of 30 days or P270 at the end of 120 days. At what rate is the
buyer paying simple interest if he agree to pay at the end of 120 days.
PROBLEM SET (SIMPLE INTEREST)
1. A loan was made 3 years and 4 months ago at 6% simple interest. The
principal amount of loan has just been repaid along with P800 of interest.
Compute the principal amount of the original loan.
2. A bank loan of P2,000.00 was made at 8% simple interest. How long would
it take in years for the amount of the loan and interest to equal P3,280.00
3. A bank deposit of P4,000 was made one year ago in one of the local banks
which pays monthly interest. The bank account accumulates now to
P4,392.60. Compute the effective annual interest rate.
4. If you borrowed P10,000 from a bank with 18% interest per annum, what is
the total amount to be repaid at the end of one year?
5. What will be the future worth of money after 12 months, if the sum of
P25,000 is invested today at simple interest rate of 1% per year?