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    Lesson 24 Simple Interest

    Uploaded by

    Paul John Cuntapay
    Here are the steps to solve these problems: 1) Interest = Principal x Rate x Time = 30,000 x R x 5 = 45,000 2) R = (45,000 - 30,000) / (30,000 x 5) = 0.1 = 10% 2) Interest = Principal x Rate x Time = 50,000 x 12% x T = 72,000 - 50,000 = 22,000 3) 22,000 = 50,000 x 12% x T T = 22,000 / (50,000 x 0.12) = 6 years 3) Future Value = Principal x (1 + Rate)^Time = 200

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    © All Rights Reserved
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    Lesson 24 Simple Interest

    Uploaded by

    Paul John Cuntapay
    63 views28 pages
    Here are the steps to solve these problems: 1) Interest = Principal x Rate x Time = 30,000 x R x 5 = 45,000 2) R = (45,000 - 30,000) / (30,000 x 5) = 0.1 = 10% 2) Interest = Principal x Rate x Time = 50,000 x 12% x T = 72,000 - 50,000 = 22,000 3) 22,000 = 50,000 x 12% x T T = 22,000 / (50,000 x 0.12) = 6 years 3) Future Value = Principal x (1 + Rate)^Time = 200

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    © © All Rights Reserved

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    Here are the steps to solve these problems: 1) Interest = Principal x Rate x Time = 30,000 x R x 5 = 45,000 2) R = (45,000 - 30,000) / (30,000 x 5) = 0.1 = 10% 2) Interest = Principal x Rate x Time = 50,000 x 12% x T = 72,000 - 50,000 = 22,000 3) 22,000 = 50,000 x 12% x T T = 22,000 / (50,000 x 0.12) = 6 years 3) Future Value = Principal x (1 + Rate)^Time = 200

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    63 views28 pages

    Lesson 24 Simple Interest

    Uploaded by

    Paul John Cuntapay
    Here are the steps to solve these problems: 1) Interest = Principal x Rate x Time = 30,000 x R x 5 = 45,000 2) R = (45,000 - 30,000) / (30,000 x 5) = 0.1 = 10% 2) Interest = Principal x Rate x Time = 50,000 x 12% x T = 72,000 - 50,000 = 22,000 3) 22,000 = 50,000 x 12% x T T = 22,000 / (50,000 x 0.12) = 6 years 3) Future Value = Principal x (1 + Rate)^Time = 200

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 28

    SOLVING PROBLEMS INVOLVING

    SIMPLE INTEREST
    1
    An annual simple interest is based on 3 factors
    namely:
    1. Principal which is the amount invested or
    borrowed
    2. Simple interest rate, usually expressed in percent
    3. Time or term of loan, in years

    2
    Annual Simple Interest
    𝐼𝑠 = 𝑃𝑟𝑡
    Where
    𝐼𝑠 = simple interest
    𝑃 = principal
    𝑟 = rate
    𝑡 = time or term, in years
    3
    A bank offers 0.25% annual simple
    interest rate for a particular deposit. How
    much interest will be earned if 1 million
    pesos is deposited in this savings account
    for 1 year?

    4
    Given: P = P1,000,000 r = 0.25% = 0.0025
    t = 1 year
    Find: 𝐼𝑠
    𝐼𝑠 = 𝑃𝑟𝑡 = (1,000,000)(0.0025)(1)
    𝐼𝑠 = 𝑃2,500
    Ans: The interest earned is P2,500.

    5
    Interest in savings account in the
    Philippines is subject to 20% withholding
    tax. If 20% withholding tax will be
    applied, then the actual interest earned is
    2,500 0.8 = 𝑃2,000

    6
    How much interest is charged when
    P50,000 is borrowed for 9 months at an
    annual simple interest rate of 10%?

    7
    Given:
    P = P50,000, r = 10% = 0.10, t = 9
    9
    months, = year = 0.75 year
    12
    Note:
    When the term is expressed in months
    𝑀
    (M), it should be converted to years by 𝑡 = .
    12
    8
    Find: 𝐼𝑠
    𝐼𝑠 = 𝑃𝑟𝑡
    9
    = 50,000 0.10
    12
    = (50,000)(0.10)(0.75)
    𝐼𝑠 = P3, 750
    Ans: The simple interest charged is P3, 750
    9
    Complete the table below by finding the
    unknown
    Principal Rate (r) Time (t) Interest (𝑰𝒔 )
    (P)
    (a) 2.5% 4 1, 500
    36, 000 (b) 1.5 4, 860
    250, 000 0.5% (c) 275
    500, 000 12.5% 10 (d)
    10
    Principal (P) Rate (r) Time (t) Interest (𝑰𝒔 )
    (a) 2.5% 4 1, 500

    a. The unknown principal (P) can be obtained


    𝐼𝑠
    by 𝑃 =
    𝑟𝑡
    1,500
    Therefore, 𝑃 = = 𝑃15,000
    0.025 4
    11
    Principal (P) Rate (r) Time (t) Interest (𝑰𝒔 )
    36, 000 (b) 1.5 4, 860
    b. The unknown rate (r) can be obtained by
    𝐼𝑠
    r=
    𝑃𝑡
    4,860
    Therefore, r = = 0.09 = 9%
    36,000 1.5
    12
    Principal (P) Rate (r) Time (t) Interest (𝑰𝒔 )
    250, 000 0.5% (c) 275
    c. The unknown time(t) can be obtained by
    𝐼𝑠
    t=
    𝑃𝑟
    275
    Therefore, t = = 0.22 years or
    250,000 0.005

    = 12 ∗ 0.22 = 2.64 months 13


    Principal (P) Rate (r) Time (t) Interest (𝑰𝒔 )
    500, 000 12.5% 10 (d)
    d. The unknown interest(𝐼𝑠 ) can be obtained
    by
    𝐼𝑠 = 𝑃𝑟𝑡
    Therefore,
    𝐼𝑠 = 500,000(0.125)(10) = 𝑃625,000
    14
    So, when any of the factors is unknown, use
    the following to find for it:
    Unknown Formula
    Principal (P) 𝐼𝑠
    𝑃=
    𝑟𝑡
    rate (r) 𝐼𝑠
    𝑟=
    𝑃𝑡
    time (t) 𝐼𝑠
    𝑡=
    𝑃𝑟 15
    1. When invested at an annual interest
    rate of 7%, an amount earned P11,200
    of simple interest in two years. How
    much money was originally invested?

    16
    2. If an entrepreneur applies for a loan
    amounting to P500,000 in a bank, the
    simple interest of which is P157,500 for
    3 years. What interest rate is being
    charged?

    17
    3. How long will a principal earn an
    interest equal to half of it at 5% simple
    interest?

    18
    Sometimes it is interesting to know the
    amount that a lender will give to the borrower
    on the maturity date. For instance, you may be
    interested to know the total amount of money
    in a savings account after t years at an interest
    rate r. This amount is called the maturity value
    of future value (F).
    19
    Maturity (Future) Value
    𝐹 = 𝑃 + 𝐼𝑠
    Where
    𝐹 = maturity (future) value
    𝑃 = principal
    𝐼𝑠 = simple interest
    20
    Since 𝐼𝑠 = 𝑃𝑟𝑡, if we substitute it to 𝐹 = 𝑃 + 𝐼𝑠 , we get
    𝐹 = 𝑃 + 𝑃𝑟𝑡
    Therefore, 𝐹 = 𝑃 1 + 𝑟𝑡
    Where
    𝐹 = maturity (future) value
    𝑃 = principal
    𝑟 = interest
    𝑡 = term/time in years
    21
    Find the maturity value if 1 million
    pesos is deposited in a bank at an annual
    simple interest rate of 0.25% after
    a. 1 year
    b. 5 years

    22
    Given
    P = 𝑃1,000,000 𝑟 = 0.25% =
    0.0025
    Find
    a. Maturity or future value F after 1 year
    b. Maturity or future value F after 5 years
    23
    Find the unknown principal P, rate r, time t,
    and interest I by completing the table.
    Principal (P) Rate(r) Time (t) Interest (I)
    10,000 8% 15 (a)
    (b) 2% 5 10,000
    360,000 (c) 2 3,600
    500,000 10.5% (d) 175,500
    880,000 9.25% 2.5 (e)
    24
    a. When t = 1
    𝐹 = 𝑃 1 + 𝑟𝑡 = 1,000,000 1 + 0.0025 ∗ 1
    = 𝑃1,002,500
    b. When t = 5
    𝐹 = 𝑃 1 + 𝑟𝑡 = 1,000,000 1 + 0.0025 ∗ 5
    = 𝑃1,012,500
    Note: Solve F using 𝐹 = 𝑃 + 𝐼𝑠
    25
    1. What are the amounts of interest and
    maturity value of a loan for P150,000 at
    6.5% simple interest for 3 years?
    2. At what simple interest rate per annum will
    P25,000 accumulate to P33,000 in 5 years?
    3. How long will P40,000 amount to P51,200 if
    the simple interest rate is at 12% per
    annum?
    26
    4. In order to have P200,000 in 3 years, how
    much should you invest if the simple
    interest is 5.5%?
    5. Angel deposited P20,000 in a bank that
    pays 0.5% simple interest. How much will
    her money after 6 years?
    6. At what simple interest rate will an amount
    of money double itself in 10 years?
    27
    1. At what simple interest rate per annum will
    P30,000 accumulate to P45,000 in 5 years?
    2. How long will P50,000 amount to P72,000 if
    the simple interest rate is at 12% per
    annum?
    3. In order to have P200,000 in 3 years, how
    much should you invest if the simple
    interest is 5.5%?
    28

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