WHOLE BRAIN LEARNING SYSTEM

OUTCOME-BASED EDUCATION

GENERAL MATHEMATICS 11
LEARNING QUARTER 2

MODULE WEEKS 1&2

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 MODULE IN
GENERAL MATHEMATICS

QUARTER 2
WEEKS 1 & 2

Simple and Compound Interests

Development Team

Writer: Marites C. Peralta

Editors/ Reviewers: Eldefonso B. Natividad Jr. Gerson Jeremy C. Antonio
Myla Fei Martinez
Illustrator/Layout Artist: Marites C. Peralta
Management Team:
Vilma D. Eda Arnel S. Bandiola
Lourdes B. Arucan Juanito V. Labao
Marlyn S. Ventura

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 What I Need to Know

This module was designed to help you understand basic Business Mathematics.
Business Math is the study of mathematics required by the field of business. Business
professionals will work with taxes, gross earnings, product prices and currency exchange.
They will offer loans, lines of credit, mortgages, annuities, bonds, and other financial tools.
However, only the basics on business mathematics are what you are going to study here.
Second quarter starts with simple and compound interests. You will learn some
terminologies in here. You will compute for the simple interest, interest compounded
annually as well as the future and present value of money in the simple and compound
interests environment.

Most Essential Learning Competencies:

The learners:
1. illustrate simple and compound interests
2. distinguish between simple and compound interests
3. compute interest, maturity value, future value and present value in simple interest
and compound interest environment
4. solve problems involving simple and compound interest

Objectives:
At the end of the module, the learners should be able to:
1. define terms involving simple and compound interests
2. illustrate simple interest and compound interest
3. distinguish simple and compound interests
4. compute interest, maturity or future value and present value in the simple and
compound interests environment
5. solve real-life problems involving simple and compound interest

What I Know

Directions: Read each item carefully. Choose the correct answer from among the choices.
Write the letter of your choice on a separate sheet of paper.

1. It is the amount earned for a year by multiplying the principal amount by the interest rate
that usually lasts for a year or less.

A. Compound Interest B. Maturity Value

C. Present Value D. Simple Interest
2. The person or institution that invests the money or makes the funds available is called
A. borrower/debtor B. interest
C. lender/creditor. D. principal amount.

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3. It is the amount computed from the principal and the accumulated past interests.
A. Compound Interest B. Future Value
C. Maturity Value D. Simple Interest
4. It refers to the amount paid or earned for the use of money.
A. Interest B. Principal C. Rate D. Term
5. It is the date on which the loan or money borrowed is to be completely paid.
A. Approval Date B. Loan Date C. Maturity Date D. Payment Date
6. How much is the future value of ₱25,000.00 after a year if the annual interest rate of 6% is
compounded annually?
A. ₱25,600.00 B. ₱26,000.00 C. ₱26,500.00 D. ₱27,000.00
7. How much money must be deposited today to become ₱10,000 in 10 years at 5%
compounded annually?
A. ₱6,139.13 B. ₱6,319.13 C. ₱6,931.13 D. ₱6,931.31
8. An amount of ₱1,000,000.00 is invested in a financial institution. How long will it take for
the amount to reach ₱1,001,000.00 at 2% simple interest?
A. 18 days B. 30 days C. 6 months D. 1 year
9. What is the present value of the money if its future value is ₱20,000.00 in 5yrs at 2.5%
compounded annually?
A. ₱17,677.06 B. ₱17,677.90 C. ₱ 17,679.07 D. ₱17,977.06
10. At what simple interest rate will ₱1,000,000.00 earn ₱6,000.00 in 10 months?
A. 1.00% B. 0.72% C. 0.20% D. 0.10%
11. What is the frequency of conversion if the principal is compounded monthly?
A. 1 B. 2 C. 4 D. 12
12. If the annual interest rate is 20% compounded quarterly, what would be the interest rate
in the conversion period?
A. 4% B. 5% C. 6% D. 10%
13. What would be the nominal rate if the interest rate per conversion period is 1% and the
money is compounded monthly?
A. 12% B. 15% C. 16% D. 18%
14. When the total number of conversion periods is 24 and the term is 12 years, then the
money is compounded ______.
A. annually B. monthly C. quarterly D. semi-annually
15. Mr. Buenavista has invested ₱200,000.00 for 5 years. What would be the future value of
his money at 1.5% compounded every 6 months?
A. ₱232,108.20 B. ₱232,801.02 C. ₱312,616.04 D. ₱312,661.40

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 Lesson
ILLUSTRATING SIMPLE AND
1 COMPOUND INTERESTS

What’s In

Activity 1: Prepare for the Future!

Directions: Read and understand each statement. Do what is required. Use a separate sheet
in answering this activity.

1. Know the net income or take home pay of your parents.

2. Make a list of all the bills that must be paid, the average expenses for the daily
needs like foods, vitamins or medicines, fare, debts to pay if there are, and the
like.
3. Find how much is left from the net income of your parents.
4. Tell what you will do with the amount left. Justify your response.
5. Identify some ways on how you could take good care of hard-earned money.

What’s New
During the first quarter you learned about functions. In this second quarter of General
Mathematics, you will be familiarized with basic business mathematics. This starts with
simple and compound interests. In this lesson, you are going to illustrate simple interest and
compound interest. They are definitely different from each other although they are both used
in money matters.

What Is It

You must be familiar with the different terms in basic business mathematics. Read
the following definitions to help you get through the course of the lesson:

Word Meaning
Lender or Creditor The person (or institution) who invests the money or makes the
funds available.
Borrower or Debtor The person (or institution) who owes the money or avails of the
funds from the lender.

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 Origin or Loan Date The date on which money is received by the borrower.
Maturity Date The date on which the money borrowed or loan is to be
completely paid.
Time or term (t) The amount of time the money is borrowed or invested. It is the
length of time between the origin and maturity dates.
Principal (amount) P The amount of money borrowed or invested on the original date.
Rate (r) The annual rate, usually in percent, charged by the lender.
Interest (I) The amount paid or earned for the use of money.
Simple Interest (Is) The interest that is computed only on the principal.
Compound Interest (Ic) The interest that is computed on the principal and also on the
accumulated past interests.
Maturity Value or The amount that the lender receives from the borrower on the
Future value (F) maturity date.
Illustrative Examples:
Example 1. Suppose you won a prize of ₱10,000.00 and you plan to invest it for 5 years. A
cooperative group offers 2% simple interest rate per year. A bank offers 2%
compounded annually. Which will you choose and why?
Solutions:
To decide which offer is more favourable, we need to compute the maturity value of
the investment in each case using the given information.
A) Investing in a cooperative with a simple interest
Given:
P = ₱10,000.00
r = 2% = 0.02
t = 5 years

Simple Interest
Time (t) Amount after t years (Maturity Value)
Solution Answer
1 (10,000)(0.02)(1) 200 10,000 + 200 = 10,200
2 (10,000)(0.02)(2) 400 10,000 + 400 = 10,400
3 (10,000)(0.02)(3) 600 10,000 + 600 = 10,600
4 (10,000)(0.02)(4) 800 10,000 + 800 = 10,800
5 (10,000)(0.02)(5) 1,000 10,000 + 1,000 = 11,000

After 5 years of investing the amount of ₱10,000.00 in a cooperative that offers 2%

simple interest rate per year, the maturity value becomes ₱11,000.00. The interest earned is
₱1,000.00.
B) Investing in a bank compound annually
Given: P = ₱10,000.00
r = 2% = 0.02 (compounded annually)
t = 5 years
Amount at Compound Interest
Time Amount after t years (Maturity
the start of
(t) Solution Answer Value)
year t
1 10,000 (10,000)(0.02)(1) 200 10,000 + 200 = 10,200
2 10,200 (10,200)(0.02)(1) 204 10,200 + 204 = 10,404
3 10,404 (10,404)(0.02)(1) 208.08 10,404 + 208.08 = 10,612.08
4 10,612.08 (10,612.08)(0.02)(1) 212.24 10,612.08 + 212.24 =10,824.32
5 10,824.32 (10,824.32)(0.02)(1) 216.49 10,824.32 + 216.49= 11,040.81

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 After 5 years of investing the amount of ₱10,000.00 in a bank that offers 2% interest
rate compounded annually, the maturity value becomes ₱11,040.81. The interest earned
here is ₱1,040.81.
Therefore, you will choose investing in a bank that offers 2% compounded annually.
It is evident that compounded interest gives a higher yield.

What’s More

Activity 2: Need help?

Directions: Read the given situation and do what is required. Use a separate sheet of paper
in answering this activity.

Kendra aims to invest an amount of ₱180,000 in 5 years. Which investment is a

better choice for Kendra, a 7% simple interest or compound interest per annum? Justify
your answer by providing a comparative analysis of the interests earn in each case.

What I Have Learned

1. The following terms are useful in understanding simple and compound interests:
Lender or creditor Rate (r)
Borrower or debtor Interest (I)
Origin or loan date Simple Interest (Is)
Maturity date Compound Interest (Ic)
Time or term (t) Principal (amount) P
Maturity Value/Future value (F)
2. The simple interest results from the product of the principal amount, interest rate, and
time.
3. In compound interest, the interest is gaining also another amount of interest.
4. The maturity value is obtained from the sum of the principal amount and its corresponding
interest.

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 What I Can Do

Activity 3. A Reflection
Direction: Answer the following questions on a separate sheet of paper.
1. In your own understanding, what is the difference between simple interest and compound
interest?
2. How can your understanding of simple and compound interests be applied in real-life
activities such as borrowing or investing money?

Lesson

2 SIMPLE INTEREST

What’s In

Activity 1: What Do You Remember

Directions: Identify what is being described in each item. Use a separate paper for your
answer sheet.

1. It is the amount that the lender receives from the borrower on the maturity date.
2. It is the interest that is computed on the principal and also on the accumulated past
interests.
3. It is the interest that is computed only on the principal.
4. It is the amount paid or earned for the use of money.
5. It is the amount of money borrowed or invested on the original date.
6. It is the date on which the money borrowed or loan is to be completely paid.
7. It refers to the person (or institution) that invests the money or makes the funds available.
8. It is the amount of time the money is borrowed or invested.

What’s New

As much as possible, we do save for the future because we don’t know what lies
ahead. It is also good if we can make investment to make our money grow. It would not be
bad if we lend money especially when it earns interest.

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 Whether you are the investor or the borrower, it is important that you know how the
money profits as business goes. In this lesson, you will focus on simple interest, its present
and future value as well.

What Is It

An annual simple interest (Is) is based on three (3) factors, namely:

1. Principal (P) which is the amount invested or borrowed
2. Simple interest rate (r) which is usually in percent
3. Time (t) or term of the loan or investment in years
The annual simple interest is computed using the formula,

Is = Prt
The simple interest is the result of multiplying the given principal amount, rate and
the time.
Algebraically, we can derive the formulae to find the principal, rate and time. These
are:
𝐼 𝐼 𝐼
P= r= t=
𝑟𝑡 𝑃𝑡 𝑃𝑟

To compute for the principal amount, divide the given interest by the product of the
rate and time.
To compute for the rate, divide the given interest by the product of the principal
amount and time.
To compute for the time, divide the given interest by the product of the principal
amount and the rate.

Illustrative Examples:
Example 1. Charlie borrowed an amount of ₱200,000 at 3.5% simple interest per annum.
Find the interest of the amount he borrowed after 8 years.
Solution: Given: P = 200,000 Is = Prt
r = 3.5% = 0.035 = (200,000) (0.035) (8)
t=8 = 56,000
The interest earned is ₱ 56,000.00

Example 2. How much interest is charged when ₱50,000 is borrowed for 9 months at an
annual simple interest rate of 10%?
Solution: Given: P = 50,000
9 𝑚𝑜𝑛𝑡ℎ𝑠
t= = 0.75 (convert the months into years by t = )
12 12

r = 10% = 0.10 or 0.1

Is = Prt

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 9
= (50,000) (0.1) ( )
12

= (50,000) (0.1) (0.75)

= 3,750 The interest charged is ₱ 3,750.00

Example 3. When invested at an annual interest rate of 7%, the amount earned ₱11,200
simple interest in 2 years. How much money was originally invested?
𝐼
Solution: Given: r = 7% = 0.07 P=
𝑟𝑡
11,200
t=2 =
(0.07)(2)
11,200
Is = 11,200 =
(0.14)

= 80,000
The principal amount was ₱ 80,000.00

Example 4. If a certain cooperative offers a loan amounting to ₱500,000.00 that earns

₱157,500.00 simple interest for 3 years, what interest rate is being charged?
𝐼
Solution: Given: P = 500,000 r = 𝑃𝑡
157,500
Is = 157,500 = (500,000)(3)
157,500
t=3 =
1,500,000

= 0.105 = 10.5%
The cooperative charged 10.5% annual simple interest rate.

Example 5. How long will the amount of ₱50,000.00 gain a simple interest of ₱10,000.00 at
4% per annum?
𝐼
Solution: Given: P = 50,000 t=
𝑃𝑟
10,000
Is = 10,000 =
(50,000)(0.04)
10,000
r = 4% = 0.04 =
2,000
= 5 It will take 5 years.

Maturity Value or Future Value is the amount that the lender receives from the
borrower on the maturity date. It can be the total amount of money in a savings account after
t years at an interest r. In the succeeding examples, you will know how to obtain the future
amount and present value in simple interest.

In simple interest, maturity value is obtained by adding the principal amount and its
interest, or the formula F = P(1+rt) can be used.

Example 1. Carmela borrowed an amount of ₱200,000.00 at 3.5% simple interest per

annum. Find the future value of his money after 8 years.
Given: P = 200,000
r = 3.5% = 0.035
t=8

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 Solution 1: Is = Prt F = P + Is
= (200,000)(0.035)(8) = 200,000 + 56,000
= 56,000 = 256,000

Solution 2: Use the formula F = P(1+rt) to get the future value.

F = P(1+rt)
= 200,000(1 + 0.035 • 8)
= 200,000(1 + 0.28)
= 200,000(1.28)
= 256,000 The future value of his money is ₱256,000.00

Example 2. What is the maturity value if ₱ 1,000,000.00 is deposited in a bank at an annual

simple interest rate of 0.25% after 1 year? After 5 years?
Solution: Given: P = 1,000,000 F = P(1+rt)
r = 0.25% = 1,000,000(1 + 0.0025 • 1)
t=1 = 1,000,000(1.0025)
= 1,002,500
F = P(1+rt)
= 1,000,000(1 + 0.0025 • 5)
= 1,000,000(1.0025)
= 1,012,500
The maturity value in 1 year is ₱1,002,500.00. After 5 years, the maturity value
becomes ₱1,012,500.00

Example 3. Find the present value at 8% simple interest of a debt ₱54,000 due in 1 year.
Solution: Given: F = ₱54,000 F = P(1+rt)
r = 8% = 0.08 54,000 = P(1 + 0.08 • 1)
t = 1 year 54,000 = P(1.08)
54,000
=P
1.08
P = 50,000 The present value
Is ₱50,000.00

What’s More
Activity 2: Complete Me!
Directions: Complete the missing parts of the table. Show your complete solution. Use a
separate paper for your answer sheet.

Simple Future
Principal (P) Rate (r) Time (t)
Interest (Is) Value (F)
#1 2.5% 4 1,500 #5
36,000 #2 1.5 4,860 #6
250,000 0.5% #3 2,750 #7
500,000 1.5% 10 #4 #8

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 What I Have Learned

1. The formula for simple interest is Is = Prt.

2. The formulae to find the principal, rate and time can be derived from the simple
interest formula by applying some mathematical properties and operations.
3. The future value of money in simple interest is obtained by adding the principal
amount and the interest earned or use the formula F = P(1 + rt). The same
formula can be used to find the present value of money given the future value,
rate and time.

What I Can Do
Activity 3. Problem Solving
Directions: Read and analyze each problem. Show your complete solution. Use a separate
paper for your answer sheet
1. Lydia invested a certain amount at 8% simple interest per year. After 6 years, the interest
she received amounted to ₱48,000.00. How much did she invest?
2. If Carlos borrowed ₱88,800.00 at an annual simple interest rate of 10.25% for 18 months,
how much interest should he pay?
3. How long will the amount of ₱300,000.00 earn ₱157,500 at 10.5% simple interest per
annum?
4. What is the maturity value if ₱1,500,000.00 is deposited in a bank at an annual simple
interest rate of 0.15% after 1 year?
5. How long will a principal earn an interest equal to half of it at 5% simple interest?
6. At what simple interest rate will an amount of money double itself in 10 years?

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 Lesson

3 Compound Interest

What’s In

Activity 1: Happy Debut!

Directions: Read the situation carefully, then give what is required in the guide questions.
Use a separate paper for your answer sheet.

Situation:
On the 7th birthday of my daughter, I plan to deposit an amount in a bank that pays 1%
interest compounded annually. How much should I deposit if I want to have ₱100,000.00
on my daughter’s 18th birthday?
Guide questions:
1. What term is associated to ₱100,000.00?
2. What type of interest does the bank offer?
3. What is the interest rate?
4. How long is the investment term?
5. How much interest will the money earn after the term of investment?

What’s New

Many banks pay compound interest on savings account. In this case, the interest is
added to the account at regular intervals, and the sum becomes the new basis for computing
interest. Thus, the interest earned at a certain time interval is automatically reinvested to
yield more interest.

What Is It

The compound interest is obtained using the formula Ic = F – P

Where: F is the future or maturity value at the end of the term

P is the principal amount or present value.

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 To solve for the future value or the present value of money in compound interest, use
the formula F = P(1+r)t
Illustrative Examples:
Example 1. Find the compound interest and the maturity value if ₱10,000.00 is compounded
annually at an interest rate of 2% in 5 years.
Solution: Given: P = 10,000.00
t=5
r = 2% = 0.02
F = P(1+r)t
= 10,000(1 + 0.02)5 Ic = F – P
= 10,000(1.02)5 = 11,040.81 - 10,000.00
= 10,000(1.104081) Ic = 1,040.81
F = 11,040.81 (notice that these are the same amount in the
second table in lesson 1)
The maturity value is ₱11,040.81 and the compound interest is ₱1,040.81

Example 2. Find the maturity value and interest if ₱50,000.00 is invested at 5% compounded
annually for 8 years.

Solution: Given: P = 50,000.00

t=8
r = 5% = 0.05
F = P(1+r)t
= 50,000(1 + 0.05)8 Ic = F – P
8
= 50,000(1.05) = 73,872.77 - 50,000
= 50,000(1.47746) *Use 5 decimal places = 23,872.77
F = 73,872.77 *Use 2 decimal places for final answer
The maturity value is ₱73,872.77 and the compound interest is ₱23,872.77
Example 3. What is the present value of ₱500,000.00 due in 7 years if money is worth 10%
compounded annually?
Solution: Given: F = 500,000.00 F = P (1+r)t
r = 10% = 0.1 500,000 = P (1 + 0.1)7
t=7 500,000 = P (1.1)7
500,000 = P (1.94872)
500,000
=P
1.94872
256,578.68 = P
The present value of money is ₱256,578.68
Example 4. How much money should you place in a time deposit that pays 1.1%
compounded annually so that it will become ₱200,000.00 after 6 years?
Solution: Given: F = 200,000.00 F = P (1+r)t
r = 1.1% = 0.011 200,000 = P (1 + 0.011)6
t=6 200,000 = P (1.011)6
200,000 = P (1.06784)
200,000
=P
1.06784
187,293.98 = P The present value of
money is ₱187,293.98

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 What’s More

Activity 2: Practice Makes Perfect!

I. Directions: Complete the missing parts of the table. Show your solution. Use a separate
paper for your answer sheet.

Principal Compound Future

Rate Time
Amount Interest Amount
10,000 2.5% 10 #1 #2
3,000 0.75% 6 #3 #4
#5 2% 5 #6 50,000

II. Directions: Analyze each problem carefully. Then, show your complete solution. Use a
separate paper for your answer sheet.

1. In 18 months, Chito earned ₱3250.00 from investment that paid 1.8% compounded
annually. How much did he invest?
2. In order to have ₱50,000.00 in 5 years, how much should you invest if the compound
interest is 5%?
3. A businessman invested ₱100,000 in a fund that pays 10.5% compounded annually for 5
years. How much will be in the fund at the end of the term?
4. A time deposit account in a bank yields 2.5% compound interest annually. Charity
invested 450,000 in 6 years in this savings account. How much interest will she gain?
5. If Sherlock wanted to double his 8500, how long should he deposit his money in a bank
which offers 6% compounded yearly?

What I Have Learned

1. Compound interest is obtained using the formula Ic = F – P

2. To find the future value or present value of compound interest, use the formula
F = P(1+r)t.
3. For convenience in the solution, use 5 decimal places when the result is non-
terminating decimal and round off to 2 decimal places the final answer.

15
 What I Can Do
Activity 3: Bida Solusyon!
Directions: Answer the following problems. Use a separate paper for your answer sheet.
1. In order to have ₱50,000.00 in 5 years, how much should you invest if the compound
interest is 5%?
2. A certain cooperative offers a loan amounting to ₱150,000.00 to its members. If the
interest is 6% compounded annually, how much will its borrower return after 4 years?
3. How much interest will ₱200,000.00 earn after 6 years if placed in a time deposit that pays
1.1% compounded annually?
4. If Sherlock wanted to double his ₱8,500.00, how long should he deposit his money in a
bank which offers 6% compounded yearly?
5. How long (to the nearest year) will it take a sum of money to double if it is invested at 15%
compounded annually?

Lesson
Compounding More Than
4 Once a Year

What’s In

Activity 1: Pair Me
Directions: Look at Column 2 for the word that is described in Column 1. Write the letter of
your choice in your answer sheet.
Column 1 Column 2
1. Period occurring every year A. Monthly
2. Period occurring every month B. Annually
3. Period occurring every six months C. Quarterly
4. Period occurring every three months D. Semi-annually

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 What’s New

There are investment schemes where interest may be compounded more than once
a year such as compounded semi-annually, quarterly or even monthly. That is why you must
also learn this lesson as a preparation for future modules in business mathematics.
To help you understand the lesson, you should be guided with the following terms
and their definitions:

Term Definition
Conversion Period The time between successive conversions of interest.
Frequency of Conversion (m) The number of conversion periods in one year.
Total Number of The product of frequency of conversion and the time in years
Conversion Periods (n) defined by:
n = (m)(t)
Nominal Rate (im) The annual rate of interest.
Rate of Interest for each Annual rate of interest divided by frequency of conversion
Conversion Period (j) denoted by:
𝑖𝑚
j= .
𝑚

What Is It

𝑖𝑚
Since the rate of each conversion period is j = , then in t years, interest is
𝑚
compounded m times or n. The formula for Maturity Value, Compounding m times a year
would be: F = P (1 + 𝑗)𝑛 , where F = maturity or future value
P = principal amount
j = rate of interest for each conversion period
n = total number of conversion periods

Illustrative Examples:
Example 1: Find the maturity value and interest if ₱10,000.00 is deposited in a bank at 2%
compounded quarterly for 5 years.
Solution: Given: P = 10,000
i(4) = 2% = 0.02
t = 5 years
m=4
𝑖𝑚 0.02
Compute for j: j = = = 0.005
𝑚 4
Compute for n: n = mt = (4)(5) = 20
F = P (1 + 𝑗 )𝑛 Ic = F - P
= 10,000(1 + 0.005) 20 = 11,048.96 – 10,000
= 10,000(1.005) 20 = 1,048.96
= 10,000(1.104896)
F = 11,048.96 The future value of money is ₱11,048.96 and the
interest is ₱1,048.96

17
Example 2: Find the maturity value and interest and interest if ₱10,000.00 is deposited in a
bank at 2% compounded monthly for 5 years?
Solution: Given: P = 10,000
i(12) = 2% = 0.02
t = 5 years
m = 12
𝑖𝑚 0.02
Compute for j: j = =
𝑚 12
Compute for n: n = mt = (12)(5) = 60
F = P (1 + 𝑗 )𝑛 Ic = F - P
0.02
= 10,000(1 + ) 60
= 11,050.79 – 10,000
12
F = 11,050.79 = 1,050.79
The future value of money is ₱11,050.79 and the
interest is ₱1,050.79

Example 3: Danilo borrows ₱50,000.00 and promised to pay the principal amount and
interest at 12% compounded semi-annually. How much interest must he pay
after 6 years?
Solution: Given: P = 50,000
i(2) = 12% = 0.12
t = 6 years
m=2
𝑖𝑚 0.12
Compute for j: j = = = 0.06
𝑚 2
Compute for n: n = mt = (2)(6) = 12
F = P (1 + 𝑗 )𝑛 Ic = F - P
= 50,000(1 + 0.06) 12 = 100,609.80 – 50,000
= 50,000(1.06) 12 = 50,609.80
= 50,000(2.012196) The interest he must pay is ₱50,609.80
F = 100,609.80

From the same formula for Maturity Value Compounding m times a year, we can also
find the present value, P.
Example 1. Find the present value of ₱50,000.00 due in 4 years if money is invested at 6%
compounded semi-annually.
Solution: Given: F = 50,000
i(2) = 6% = 0.06
t = 4 years
m=2
𝑖𝑚 0.06
Compute for j: j = = = 0.03
𝑚 2
Compute for n: n = mt = (2)(4) = 8
F = P (1 + 𝑗 ) 𝑛
50,000 = P (1 + 0.03) 8
50,000 = P (1.03) 8
50,000 = P (1.26677)
50,000
=P
1.26677
P = 39,470.46 The present value of money is ₱39,470.46

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Example 2: What is the present value of ₱25,000.00 due in 2 years and 6 months if money is
worth 10% compounded quarterly?

Solution: Given: F = 25,000

i(4) = 10% = 0.1
t = 2 years and 6 months = 2.5 years
m=4
𝑖𝑚 0.1
Compute for j: j = = = 0.025
𝑚 4
Compute for n: n = mt = (4)(2.5) = 10
F = P (1 + 𝑗 ) 𝑛
25,000 = P (1 + 0.025)10
25,000 = P (1.025)10
25,000 = P (1.28008)
25,000
=P
1.28008
P = 19,530.03 The present value of money is ₱19,530.03

What’s More

Activity 2: You Complete Me

Directions: Complete the table and show your solution to support your answer. Do it in a
separate sheet of paper.

Interest
Principal Frequency Time Total Compound
Nominal Rate Compound
Amount of in Number of Amount
Rate per interest
(P) Conversion Years Conversions (F)
Period

Semi-
10,000 8% #1 15 #2 #3 #4
annually

#5 12% monthly #6 10 #7 #8 50,000

What I Have Learned

Compounded interest may not always be annually but it can also be semi-annually,
quarterly, and even monthly. Conversion period depends on the scheme that the investment
requires.
The maturity value and present value of money in compounding more than once a
year is obtained using the formula: F = P (1 + 𝑗)𝑛
where F = maturity or future value
P = principal amount
𝑖𝑚
j = rate of interest for each conversion period =
𝑚
n = total number of conversion periods = (m)(t)

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 What I Can Do

Activity 3: Decide Wisely

Directions: Read and analyze the given situation. Identify which would be the better choice
for investment. Support your answer. Do it in a separate sheet of paper.
Gerardo has a choice for his investment of ₱250,000. He can invest it in either of these
banks with the conditions below;
a) Rural Bank that gives 4% compounded quarterly for 3 years
b) Urban Bank that gives 2% compounded semi-annually for 6 years.

Assessment
Directions: Read each item carefully. Choose the correct answer from among the choices.
Use a separate paper for your answer sheet.

1. Mr. Dela Cruz borrowed ₱100,000.00 at 8% compounded annually. How much will he be
paying after 2 years?
A. ₱32,400.00 B. ₱34,200.00 C. ₱114,660.00 D. ₱116,640.00
2. A time deposit in a bank yields 2.5% compound interest annually. Atty. Luiz invested
₱450,000.00 in such account. How much interest will he gain in 3 years?
A. ₱34,600.50 B. ₱36,400.50 C. ₱428,908.50 D. ₱482,908.50
3. In order to have ₱250,000.00 in 5 years, how much should you invest at a simple interest
of 8% annually?
A. ₱71,428.00 B. ₱145,170.00 C. ₱170,145.00 D. ₱178,571.00
4. How much is the maturity value of money worth ₱20,000.00 at 6.5% interest compounded
for 2 years and 6 months?
A. ₱23,410.20 B. ₱32,410.80 C. ₱41,230.20 D. ₱43,210.80
5. What amount must be deposited by a 15-year old student in a bank that pays 1%
compounded annually so that after 6 years he will have ₱15,000.00?
A. ₱8467.05 B. ₱8476.05 C. ₱13,140.75 D. ₱14,130.68
6. How long will the amount of ₱50,000.00 gain a simple interest of ₱10,000.00 at 4% per
annum?
A. 4 years B. 5 years C. 6 years D. 8 years
7. What is the amount of interest of a loan ₱150,000.00 at 6.5% simple interest in 3 years?
A. ₱29,250.00 B. ₱92,520.00 C. ₱159,520.00 D. ₱179,250.00
8. If a certain lending institution offers a loan amounting to ₱100,000.00 that earns
₱22,500.00 simple interest for 3 years, what interest rate is being charged?
A. 0.75% B. 5% C. 7.5% D. 9.5%

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9. In order to have ₱20,000.00 in 3 years, how much should you invest if the simple interest
is 3.5%?
A. ₱14,976.42 B. ₱16,974.60 C. ₱17,904.76 D. ₱19,047.62
10. Find the interest of money worth ₱200,000.00 invested for 10 years in a cooperative that
pays 5% simple interest per annum.
A. ₱100,000 B. ₱125,778.93 C. ₱175,904.73 D. ₱180,000

11. If the money is compounded quarterly, what is the frequency of conversion?

A. 1 B. 2 C. 4 D. 12
12. When the annual interest rate is 16% compounded quarterly, what would be the interest
rate in a conversion period?
A. 4% B. 5% C. 6% D. 10%
13. What would be the nominal rate if the interest rate per conversion period is 1.5% and
the money is compounded monthly?
A. 12% B. 15% C. 16% D. 18%
14. When the total number of conversion periods is 4 and the term is 6 years, then the
money is compounded ______.
A. Annually B. Monthly C. Quarterly D. Semi-annually
15. Mr. Villafuerte has invested ₱200,000.00 for 5 years. What would be the future value of
his money at 1.25% compounded every 6 months?
A. ₱212,857.49 B. ₱221,857.49 C. ₱225,816.49 D. ₱228,571.49

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 Answer Key

Pre Test Post Test

Lesson 1:
Activity 1: Prepararied answers

22
Ac1. Maturity/Future Value 5. Principal Amount
REFERENCES

Flores, Maricar, Ed.D. et.al. 2016. Worktext in General Mathematics for Senior High
School. Quezon City: C & E Publishing, Inc.

General Mathematics Learner’s Material (Philippines, Pasig City: Department of

Education, First Edition 2016), p.135
General Mathematics Teacher’s Guide. First Edition (2016) Department of Education
STARBOOK – DOST - STII. First Philippine Science Digital Library. November 2015

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For inquiries or feedback, please write or call:

Department of Education – Schools Division of Laoag City

Curriculum Implementation Division
Brgy. 23 San Matias, Laoag City, 2900
Contact Number: (077)-771-3678
Email Address: [email protected]