ILOCOS SUR

POLYTECHNIC STATE 1
Tagudin Campus
COLLEGE
MODULE
1

Module 1
Simple Interest
Instructor: MR LITO W. BINAY-AN
(Associate Professor 5)

Course Description
The course introduces students the basic understanding of the
applications of mathematical concepts and skills in economics, business and
accounting. It includes determining the time value of money using simple and
compound interest and discounting variation of annuities, amortization, and
sinking funds.

What you are expected to learn in Module 1?

After going through this module, you are expected to:
1. Define what is a simple interest.
2. Derive related formulas from Is = PRT and F= P + Is
3. Differentiate an ordinary interest from an exact interest and be able to
compute them correctly. Further compute for maturity value, simple interest
rate, principal and time correctly.
4. Differentiate an actual time from an approximate time and be able to
compute them correctly.
5. Apply the Bankers’ Rule after determination of the actual time and
approximate time.
6. Define what is a discount and apply corresponding formulas properly.
7. Apply interest rate payable in advance.

How to learn from this module/ Directions

This type of instructional material is prepared for you as
an answer to blended learning in times of a pandemic like
the Covid-19. The midterm and final terms contain subject
matter that had been broken down into subtopics to cover
the syllabus content. Series of activities are given
(Worksheets) and Exercises in the subtopics to test how well you understood
the subject matter. If health protocol warrants, you will be asked to report to
school to perform individually other formative and summative evaluations to
ensure that you had really gone through this module yourself. BUT if face-to-
face is not yet possible, you will be sending your answers to activities using
the following format STRICTLY:

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 2
Tagudin Campus
COLLEGE
MODULE
2

Bond paper size: A4 but if not available, use the short coupon bond
Font size: 12 Bookman Old Style
Spacing: Use double space to facilitate the checking
NOTE: Please DONOT FORGET to specify your complete name, sex,
section and date of passing. Arrange and staple them properly before
submitting them. Place them in an ordinary short envelop specifying
outside the envelop the following:
Complete Name: Family Name, First Name, Middle Name
Email address: Please use your Official Name in your email ad to
facilitate checking and recording
Course and Section: Ex. BSED 2 Math
Subject: Mathematics Investment
Name of Instructor: Binay-an, Lito W. (Associate Professor 5)
The answer sheets or feedback will not be provided to you in advance
to ensure that you evade from referring to them and this will not impair your
own learning process.
Aside from the series of worksheets, you will be required to answer the
midterm and final examinations in a face to face basis if allowed. If not
allowed, examinations will be given in Google Forms or Testmoz.
Therefore, it is a must that you access ONLINE so that you can take the
examinations or quizzes as scheduled.
Course Requirements
Assignments:
1. Answered Worksheets and Exercises
2. Midterm and Final Examinations

Grading System:
60% Class Standing + 40% Term Exams = Term Grade
The following are components of the Class Standing
Exercises…...……………………………………….40%
Worksheets………………………………………….60%
Total Class Standing……………………………….100%

Midterm Grade 50%

Final Grade 50%
FINAL RATING 100%

MODULE 1. Simple Interest

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 3
Tagudin Campus
COLLEGE
MODULE
3

Lessons:

Lesson 01. Simple Interest

Lesson 02. Ordinary Interest vs. Exact Interest
Lesson 03. Counting the Time Between Dates
Lesson 04. Combining Ordinary Interest, Exact Interest,
Approximate Time and Exact Time
Lesson 05. Simple Discount at Simple Interest
Lesson 06. Interest Payable in Advance

Introduction
In business transactions, money can either be lent or
borrowed and both should bear interest. To the lender or
investor, interest for him/her is a form of income derived or obtained
from an invested capital. On the part of the borrower or debtor, he
may regard interest as money paid for the use of other’s money. It
should be pointed out that both parties, the investor or debtor are
benefited in the money transactions.
This chapter presents and explains how the simple interest
formula is being used, how to count the time covered between dates,
how to compute simple interest by Six Percent Method, and how to
accumulate at Simple Interest.
Lesson 01. SIMPLE INTEREST
For any specified time unit (denoted by t), interest is a fixed
rated proportion (denoted by I). In such a transaction, the date when
the money was already received by the borrower is called the origin
date, and the date in which this money borrowed is to be fully repaid
is called the maturity date. The time covered between the origin date
and the maturity date by the business transaction is called the term
of the loan.
To illustrate:

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 4
Tagudin Campus
COLLEGE
MODULE
4

original amount (P) maturity value (F)

simple interest rate (r)

origin date maturity date

term of the loan (t)

Figure 1

Simple Recall:

A. Since percent (%) means per hundred (1/100)…

1 25
25 %=25 ( ) 100
=
100
=0 . 25

1 2 .5
2. 5 %=2 .5 ( )= =0 .025
100 100

1 .25
.25 %=. 25 ( ) = =0. 0025
100 100

1 1. 25
1 1 4 %=1 . 25 ( ) =
100 100
=0 . 0125

1 15 .5
%=15 .5 (
100 ) 100
15 1 2 = =0 . 155

47 % 47 1 47
= (
3 100 ) 300
15 2 3 %= =
3
A. Using Percent in Computations
Illustrative examples:
1) 20% of what number is 45?

Solution:
Let N be the number Alternative solution:
20
100 of N = 45 if 20% = .20
20
100 (N) = 45 then; .20 of N = 45

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 5
Tagudin Campus
COLLEGE
MODULE
5

20 N .20 N 45
=
100 = 45 .20 . 20
20N = 100 (45) by cross multiplication N = 225 Answer
4 ,500
N=
20
N = 225 Answer

2) What is 30% of 175?

Solution:
Let N be the unknown number Alternative solution:
30
( 175 )
100 =N 30% = .30
5 , 250
=N
100 .30(175) = N

N = 52.50
N = 52.50

3) 25 is what percent of 200?

Solution:
Let P be the unknown number
25 = P x 200
200 P 25
=
200 200
25 1
P=
200 or 8 or 0.125

P = 12.5 %

If we consider the formula,

Where:
P = percentage
B = base
Course Code: Math 153 R = rate
Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 6
Tagudin Campus
COLLEGE
MODULE
6

P=BR
Rate always appear with the percent (%) sign.
Base is always higher than the percentage because it is where
the percentage is being obtained.
The percentage is then a part of the base.
The interest that is computed on the original amount (P) and is
to be added to this amount on maturity date to come out with the
maturity value (F) is called the simple interest (I s). In the computation
of a simple interest, we also consider another factor which is the
simple interest rate (r) expressed in percent that is set by the lender.
Considering the 3 factors; principal (P), simple interest rate (r)
and time (t) which is expressed in years, the formula for simple
interest is simply the product of these 3 factors;
Thus,

Note:
Is = Prt equation 1

The simple interest rate must be in decimal or fractional form

before performing the computations.
The maturity value (F) which the lender receives on the maturity
date is the sum of the principal (P) and the computed simple interest;
Thus,

F=P+I s equation 2

DERIVATION OF FORMULAS Other

Formulas: from Is=Prt
from I s = P r t ; then…
F = P + Prt (substituting Is from eq’n 1)

F = P (1+rt) (by factoring out P) `

F
P= `
1+rt

or from equation 2,
P = F – Is ; Is = F – P
OTHER CONSIDERATIONS:
Unless otherwise specified, the time unit is one year although
the term of the business transactions maybe in months or even in

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 7
Tagudin Campus
COLLEGE
MODULE
7

days. In case the time (t) is given in months or days, convert it to

years using these formulas:

a.) time = number of months

12
b.) time = number of days (for ordinary interest)
360
c.) time = number of days (for exact interest)
365
d.) time = number of years
1

Lesson 02. ORDINARY INTEREST VS. EXACT INTEREST

Ordinary Interest. It is computed by letting all the months of
the year to have equal number of 30 days or a total of 360 days a
year.
Exact Interest. It is computed by considering the exact
number of days each month taking into account that if it is a leap
year, it has a total of 366 days.

ILLUSTRATION:
Months Ordinary Interest Exact Interest
(days) (days)
1 Jan 30 31
2 Feb 30 28/29
3 Mar 30 31
4 Apr 30 30
5 May 30 31
6 Jun 30 30
7 Jul 30 31
8 Aug 30 31
9 Sept 30 30
10 Oct 30 31
11 Nov 30 30
12 Dec 30 31
0 days 365 days/366 days (leap yr)

Therefore, when the term of investment is in days, use the

following formulas:

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 8
Tagudin Campus
COLLEGE
MODULE
8

Days
t=
A. Ordinary Interest: 360 :

Pr Days
I s=
360

 Illustrative Example:
Compute for the ordinary interest (I s) and the maturity value (F)
on P 10,000 at 6% simple interest rate deposited for 2 years.
Given Data: Solution:
P = P 10,000 a) Is = Prt
r = 6% or .06 = 10,000 (.06)
(2) = P 1,200.00
t = 2 years
Required: b) F = P + Is
a) Is = ? = P10,000+
P1,200
= P 11,200.00
b) F = ?

 Illustrative Example:
Suppose P 1,800 is the interest earned in investing P 15,000 in
2½ years, what was the interest rate used in the transaction?
Given Data: Solution:
P = P 15,000
Is
r=
Pt
t = 2.5 years
1 , 800
Is = 1,800 r=
15 , 000(2 .5 )
Required: 1 , 800
r=
37 ,500
r= ?
= .048 or 4.8%
 Illustrative Example:
Find the value of the Principal (P) and the maturity value (F) if
an investment earns P 450 in 18 months at a simple interest rate (r) of
6%.

Given Data: Solution:

Is
P=
Is = P 450 a) rt

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 9
Tagudin Campus
COLLEGE
MODULE
9

18 mo. 450
=1. 5 years =
t = 12 .06(1.5 )
450
=
r = 6% or .06 . 09
Required: = P 5,000
a) P = ?
b) F = ? b) F = P + Is
= 5,000 + 450
= P 5,450

 Illustrative Example:
How long will it take P15,000 to accumulate to P18,000 if the
simple interest rate (r) is 8%?
Given Data: Solution:
F = P 18,000 Is = F - P
P = P 15,000 = 18,000 – 15,000
R = 8% or .08 = P 3,000
I
= s
Required: t Pr
t=?
3 , 000
=
15 , 000(. 08)
Note: 3, 000
=
Is 1,200
t=
Since Pr ; = 2.5 or 2½ years
there is a need to
solve for Is first.

Illustrative Example:
Compute and compare the ordinary and exact interest if P 4,500
is invested at 6% in 105 days. Further solve for the corresponding
maturity values.
Given Data: Solution:
P = P 4,500 a) Ordinary Int; Is = Prt
4 ,500(. 06 )(105)
=
r = 6% or .06 360
28 , 350
=
t = 105 days 360
Required: = P 78.75

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 10
Tagudin Campus
COLLEGE
MODULE
10

a) Ordinary Interest: F F = 78.75 + 4,500

b) Exact Interest: F = P 4,578.75

b) Exact Int; Is = Prt

= P 77.67
F = 77.67 + 4,500
= P 4,577.67

Note: Ordinary interest (Io) is greater than exact interest (Ie)

due to the difference in the values of the denominators or divisors,
360 for ordinary interest and 365 for exact interest.

Lesson 03. COUNTING THE TIME BETWEEN DATES

The time can be determined from the origin date and maturity
date. In this case, Actual Time is distinguished from Approximate
Time. In computing interest, we include the last day but not the first
day of the item between two dates. In the approximate time, each
month is allotted 30 days or 360 days a year.

 Illustrative Example:
Find the actual and approximate time from February 24 to
November 19, 2013 on the same year.
Comparison:
Actual Time Approximate Time
Feb 4 (28-24) 6 (30-24)
March 31 30
Apr 30 30
May 31 30
June 30 30
July 31 30
Aug 31 30
Sept 30 30
Oct 31 30
Nov 19 30
TOTAL: 268 days 265 days
Using Table 1.1 for actual time (page 12)
November 19 = 323
—
February 24 = 55
268 days
Note: Treat the origin date as the subtrahend while let the
maturity date as the minuend.

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 11
Tagudin Campus
COLLEGE
MODULE
11

Table 1. Number of Days in Each Month of the Year

Day of Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Day of
Month 1 2 3 4 5 6 7 8 9 10 11 12 Month
1 1 32 60 91 121 152 182 213 244 274 305 335 1
2 2 33 61 92 122 153 183 214 245 275 306 336 2
3 3 34 62 93 123 154 184 215 246 276 307 337 3
4 4 35 63 94 124 155 185 216 247 277 308 338 4

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 12
Tagudin Campus
COLLEGE
MODULE
12

5 5 36 64 95 125 156 186 217 248 278 309 339 5

6 6 37 65 96 126 157 187 218 249 279 310 340 6
7 7 38 66 97 127 158 188 219 250 280 311 341 7
8 8 39 67 98 128 159 189 220 251 281 312 342 8
9 9 40 68 99 129 160 190 221 252 282 313 343 9
10 10 41 69 100 130 161 191 222 253 283 314 344 10
11 11 42 70 101 131 162 192 223 254 284 315 345 11
12 12 43 71 102 132 163 193 224 255 285 316 346 12
13 13 44 72 103 133 164 194 225 256 286 317 347 13
14 14 45 73 104 134 165 195 226 257 287 318 348 14
15 15 46 74 105 135 166 196 227 258 288 319 349 15
16 16 47 75 106 136 167 197 228 259 289 320 350 16
17 17 48 76 107 137 168 198 229 260 290 321 351 17
18 18 49 77 108 138 169 199 230 261 291 322 352 18
19 19 50 78 109 139 170 200 231 262 292 323 353 19
20 20 51 79 110 140 171 201 232 263 293 324 354 20
21 21 52 80 111 141 172 202 233 264 294 325 355 21
22 22 53 81 112 142 173 203 234 265 295 326 356 22
23 23 54 82 113 143 174 204 235 266 296 327 357 23
24 24 55 83 114 144 175 205 236 267 297 328 358 24
25 25 56 84 115 145 176 206 237 268 298 329 359 25
26 26 57 85 116 146 177 207 238 269 299 330 360 26
27 27 58 86 117 147 178 208 239 270 300 331 361 27
28 28 59 87 118 148 179 209 240 271 301 332 362 28
29 29 88 119 149 180 210 241 272 302 333 363 29
30 30 89 120 150 181 211 242 273 303 334 364 30
31 31 90 151 212 243 304 365 31
*Note: In leap years, after February 28, add 1 to the tabular number.

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 13
Tagudin Campus
COLLEGE
MODULE
13

How about if the term is not covered within the same year?
Illustrative Examples:
1) Find the actual time and approximate time between June 30, 2000
and February 23, 2002.
Solution: 2 (365) since 2 years in between
a) ACTUAL TIME
Feb 23, 2002 54 + 730 = 784 days
—
June 30, 2000 181 = 181 days
2 years 603 days
b) APPROXIMATE TIME
YR MO. DAY YR. MO. DAY YR MO. DAY
. .
Feb 23, 02 2 23 01 14 23 01 13 53
2002
June 30, 00 6 30 00 6 30 00 6 30
2000
1 7 23
yr. mo. day
s
Conversion: 1 (360) + 7 (30) + 23
360 + 210 + 23 = 593 days
Explanation: Since 2 minus 6 is negative, one year which is
equivalent to 12 months was borrowed. In the same manner, one
month which is equivalent to 30 days was also performed under
column for days.
2) Find the time covered between June 25, 2003 and January 30,
2004. Employ both actual time and approximate time.
Solution:
a) ACTUAL TIME
Jan. 30, 2004 30 + 365 = 395 days
—
June 25, 2003 176 = 176 days
1 year 219 days
b) APPROXIMATE TIME
YR. MO. DAY YR. MO. DAY
Jan. 30, 2004 04 1 30 03 13 30
June 25, 2003 03 6 25 03 6 25
0 7 5

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 14
Tagudin Campus
COLLEGE
MODULE
14

Conversion: 0 (360) + 7 (30) + 5

0 + 210 + 5 = 215 days

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 15
Tagudin Campus
COLLEGE
MODULE
15

Lesson 04. COMBINING ORDINARY INTEREST, EXACT

INTEREST, APPROXIMATE TIME AND EXACT TIME
Note: The following four different time factors are possible whenever
simple interest (Is) is involved.
1. Actual time 3. Actual time
360 365

2. Approximate time 4. Approximate time

360 365

Illustrative Example:
Miss Covida Pandem borrowed P860,000 on November 2, 2011
which was to be repaid on May 21, 2012 at 16.2% interest per year.
Find the simple interest to be paid using the 4 time factors.
Solution:
a.) Determine first the actual and approximate time
covered by the transaction.
ACTUAL TIME APPROXIMATE TIME
May 21, 2002 = 365 + 141 = 506 .... 02 5 21 01 17 21
—
Nov. 02, 2001 = . . . . . . = 306 .... 01 11 02 01 11 02
200 0 6 19
days
x
30
180 + 19 =
199 days
b.) Determine the simple interest using the 4 time factors.
1) Actual time ; Is = Prt = 860,000 (.162) (200)
360 360

= P 77,400.00

2) Approximate time ; Is = Prt = 860,000 (.162)

(199)
360 360

= P
3) Actual time ; Is = Prt = 860,000 (.162) (200)
365 77,013.00365

= P
4) Approximate time ; Is = Prt = 860,000
(.162) (199)
365 365

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 16
Tagudin Campus
COLLEGE
MODULE
16

= P
75,958.03
Note:
Number 1, which is actual time/ordinary interest, is the most
favorable to the creditor thus it is often used in business transactions
and is called “Banker’s Rule”.

Lesson 05. SIMPLE DISCOUNT

We have learned in the preceding chapter that simple discount
is closely related if not the same as simple interest in commercial
transactions, thus;

The interest on P; or
I =
the discount on F

The formula to discount an amount F for t years would then be;

F = P (1+ rt) then solve for,

F
P = 1+rt (by dividing both sides of the equation by 1+ rt)

In order that you will not be misled on the terms accumulate

and discount, the following examples could illustrate this.

a.) If an amount P1,000 is deposited in a bank that pays 6%

simple interest, this deposit will accumulate to P1,060 in one year.
b.) Likewise, if one buys a RTW worth P1,000 bearing a 6%
discount, then this individual pays P940.
COMPARISON:
In both cases, a and b, the interest was computed in the same
manner but the application differs. In situation a, the interest
computed was added to the principal P, (accumulated). While in
situation b, the computed interest was discounted/subtracted from
the principal (P).

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 17
Tagudin Campus
COLLEGE
MODULE
17

Thus, 6% discount used in letter b will lead to the introduction

of discount rate with symbol, d.

Mathematically;

if… d = Discount on F for one year

F

then discount for one year = Fd

CHECKING:
60 = Fd
60 = 1,000 (.06)
60 = 60
 Illustrative Example:
If P 55 is the discount on P 880 which is due at the end of one
year, then what is the discount rate (d)?

Given Data: Solution:

Discount = P 55 d = Discount amt (I)
F
F = P 880
55
Required: = 880
d =?
= .0625 or 6.25%

Suppose in illustration 2.1, the time is 10 months instead of

one year, using discount rate instead of interest rate, then…

Id = Fdt the discount equation 1

formula

Derived formulas from equation 1

Where:
Id
Id= discount d=
Ft
F = full amount
Id
d = discount rate t=
Fd
t = time Id
F=
dt
Course Code: Math 153
Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 18
Tagudin Campus
COLLEGE
MODULE
18

From:
F=P+I
P=F–I
P = F – Fdt (in replace to I)

(by factoring
P = F (1-dt) out F)
equation 2

APPLICATION:
If the time is 10 months in illustration 2.1, then the discount
rate is…
I 55 55
d= = =
Ft 880 ( 10 ) 733 .3
12 = .075 or 7.5%
Note: To discount F simply means to find its present value P on
a time before F is due in the transaction.
 Illustrative Example:
Determine the present value of P 50,500 which is due at the end
of 180 days at 6% simple discount.
Find: a) The discount on P 50,500; and
b) The discounted amount
Given Data:
F = P 50,500
d = .06
t = 180 days
Solution:
a) Discount F to get the present value P
Id = Fdt
= 50,500 (.06) (180/360)
= P 1,515.00
b) Further solve for the discounted amount
P= F – 1
= 50,500 – 1,515
= P 48,985
Alternate solution can be done by solving it directly using the formula,
P = F (1 – dt)

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 19
Tagudin Campus
COLLEGE
MODULE
19

= 50,500
[ 1−. 06 (180
360 ) ]
= 50,500 (1 – .03)
= 50,500 (.07)
= P 48,985
 Illustrative Example:
Determine the amount due at the end of 15 months whose
present value is P54,000 at 5% simple discount. Further compute for
the discount.
Given Data: Solution:
P = P 54,000 a) from P = F (1 – dt)
d = .05 P
t = 15 months F=
1−dt
54 ,000
=
Required: 1− ( . 05 ) ( 15
[ 12 ) ]
a) F = ? 54 ,000
=
b) Id = ?
1−. 0625
54 ,000
=
. 9375
= P 57,600
b) Since F and P are already known,
Use; Id = F – P
= 57,600 – 54,000
 Illustrative Example:
= P 3,600
What simple interest rate (r) is equivalent to the simple discount
rate (d) of 5% in discounting an amount of P5,000 in 6 months?
Given Data: Solution:
F = P 5,000 Before solving for r, determine
first the value of Id and P
d = .05 a.) Id = Fdt
t = 6 months 6 mo.
(
= 5,000 (.05) 12
)
= P 125.00
Required: b.) P = F – Id
Id = ? = 5,000 – 125
= P 4,875
r=? c.) From I = Prt
I
r=
Pt
125
= 6
4 ,875 ( 12 )
= .05128 or 5.13%
Course Code: Math 153
Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 20
Tagudin Campus
COLLEGE
MODULE
20

COMPARISON:
The computed simple interest rate is higher, 5.13% than the
discount rate which is 5%. This result would simply mean that
discounting P 5,000 at 5% is the same as computing its simple
interest at 5.13%.
The divisor in the discount rate is Ft while in the simple interest
rate is Pt which, of course, F would always be higher than P therefore,
result will always be higher in the simple interest.
 Illustrative Example:
Discount P120,000 for 15 months and compare the discount
value at: a) 8% simple discount b) 8% simple interest. Which of these
two will yield a higher P?

Given Data: Solution:

F = P 120,000 a) Solving P at simple interest
t = 15 months or 1.25 yrs F
P=
1+rt
r = .08
120 , 000
d = .08 =
1+. 08 ( 1 .25 )
Required:
120 , 000
a) P at simple discount =
1+1
b) P at simple interest = P109,090.91
b) At 8% simple discount,
solve for P
First Step:
Id = Fdt
= 120,000 (.08) (1.25)
= P 12,000
Second Step:
P=F–I
Course Code: Math 153
Descriptive Title: Mathematics of Invsetment = 120,000
Instructor: – W.
Mr. Lito 12,000
Binay-an
= P108,000.00
 ILOCOS SUR
POLYTECHNIC STATE 21
Tagudin Campus
COLLEGE
MODULE
21

COMPARISON:
Comparably, equal simple discount and simple interest rates
would give different results as in illustration 2.4 which shows that the
same amount F and the same time t would also result to different
computed rates, d and r.
Lesson 06. INTEREST PAYABLE IN ADVANCE
Majority of the money lending investors or even banks, charge
their borrower by deducting the computed interest in advance. The
amount received by the borrower on the origin date is called the
proceeds. It is then equal to the maturity value F less the discount
interest Id, thus in symbols;

Where:

P = F - Id P = principal or proceeds
F = maturity value
Id = discount interest
COMPARISON:
Discount interest (Id) is paid in advance or at the time the loan
has been negotiated or executed. While in simple interest (Is), it is
paid on the maturity date and it is added to the amount of the loan
applied for.
ILLUSTRATION:
Variables Using Simple Using Discount
Interest Interest (Id) in 1 year
(Is) in 1 year
Amount of loan P 10,000 P 10,000
Rate, r 7% 7%
Interest, I P 700 P 700
Take home pay, P P 10,000 P 9,300
Maturity Value, F P 10,700 P 10,000

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 22
Tagudin Campus
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MODULE
22

COMMENT:
Has the borrower really paid simple interest at 7%? From the
illustration, the simple discount is P 700 in one year thus, P is equal
to P9,300. Thus to check;
I = Prt
I 700
r= = =7 . 53 %
rt 9 ,300 ( 1 )
This result would simple mean that the borrower is actually
paying higher interest than what is actually specified or agreed upon.
This is shown in the computed interest rate of 7.53% and not 7% as
the borrower was made to believe.
 Illustrative Example:
A public school teacher transacted a petty cash loan of
P8,000.00 in a Multi-Purpose Cooperative that charges 8% interest
rate payable in advance. If the loan is payable in one year, how much
is the take-home pay (proceeds) of her loan?
Given Data: Solution:
F = P 8,000 1. Since discount rate, d is given; use
d = .08
I = Fdt
t = 1 year
= 8,000 (.08) (1)
Required: = P 640
Proceeds, p = ?
2. Solve for the discounted amount
P=F–I
= 8,000 – 640
= P 7,360 (cash given to the
teacher)
 Illustrative Example:
A.) How much cash must be given to a farmer who borrows
P15,000.00 in a Bank charging 9% discount interest rate payable
in one year?
Given Data: Solution:
F = P15,000 a) Solve for the discount interest
d = .09 first;
I = Fdt
t = 1 year = 15,000 (.09) (1)
= P 1,350.00
Required: b) Solve for P;
P=F–I
Course Code: Math 153 = 15,000 – 1,350
Descriptive Title: Mathematics of Invsetment = P13,650
Instructor: Mr. Lito(cash received by
W. Binay-an
the farmer)
 ILOCOS SUR
POLYTECHNIC STATE 23
Tagudin Campus
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MODULE
23

P=?

B.) What discount interest rate was a man charged when he received
P56,000 from the applied loan amount of P64,000 payable in 2
years time?
Given Data: Solution:
P = P56,000 a) Id = F – P

F = P64,000 = P64,000 – P56,000

t = 2 years = P8,000.00
I
r=
b) Pt
Required:
Id = ? 8 , 000
=
56 , 000 ( 2 )
r=?
8 , 000
=
112, 000
= .0714 or 7.14%

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 24
Tagudin Campus
COLLEGE
MODULE
24

MODULE 01 WORKSHETS
Name: Score:
Course & Year: Date:

WORKSHEET No. 1-Lesson 1

B. Find the rates as indicated
1.) 6 is what percent of 24?

2.) What percent of 80 is 20?

3.) 16 is what percent of 16?

4.) What percent of 4 is 2?

5.) 1 is what percent of 100?

C. Find the numbers (Percentage)

6.) 7% of 42

7.) 25% of 48

8.) 12% of 60

9.) 15% of 20

10.)0.5% of 300

D. Find the numbers (Base)

11.)10% of what number is 25?

12.)15% of what number is 24?

13.)1.5% of what number is 12?

14.)15 ¼ % of what number is 36?

15.)6.75% of number x is 75?

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 25
Tagudin Campus
COLLEGE
MODULE
25

Note: Round off answers to two decimal places if

computation is NOT EXACT.
Name: Score:
Course & Year: Date:

WORKSHEET No. 2-Lesson 2

A. Find the ordinary interest and amount (F) or maturity value on
each of the following:
Io F
1.) P 16,500 @ 5½ % for 210 days

2.) P 5,950 @ 6% for 156 days

3.) P 8,600 @ 8¼ % for 148 days

4.) P 25,600 @ 6.5% for 200 days

5.) P 10,450 @ 7% for 321 days

6.) P 4,440 @ 9% for 188 days

B. Find the exact interest and maturity value on the following:

Ie F
7.) P 10,500 @ 12 % for 150 days

8.) P 50,400 @ 5½ % for 225 days

9.) P 100,000 @ 6¼% for 302 days

10.) P 17,460 @ 7% for 170 days

11.) P 150,000 @ 4.75% for 198 days

12.) P 45,540 @ 10.25% for 208 days

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 26
Tagudin Campus
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MODULE
26

C. MISCELLANEOUS: Solve the following completely. Round off

answers to 2 decimal places if not exact.
1. How long will it take P 35,200 to accumulate to P 40,100 if money
is worth 5½ % interest rate?

Given Data: Solution:

Required:

2. Suppose a P 10,500 earns P 1,800 simple interest in 15 months,

what is the simple interest rate used?
Given Data: Solution:

Required:

3. Find the simple interest and maturity value on P 13,450 @ 5½%

simple interest rate for a period of 2¼ years.
Given Data: Solution:

Required:

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 27
Tagudin Campus
COLLEGE
MODULE
27

Name: Score:
Course & Year: Date:

WORKSHEET No. 3-Lesson 3

1.) Calculate the time between dates from June 10, 2011 to April 18,
2013. Show your computations.
a.) ACTUAL TIME

b.) APPROXIMATE TIME

2.) Determine the actual and approximate time covered from

September 20, 2010 to Match 15, 2012.
a.) ACTUAL TIME

b.) APPROXIMATE TIME

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 28
Tagudin Campus
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MODULE
28

Name: Score:
Course & Year: Date:

WORKSHEET No. 4-Lesson 4

A. Find the simple interest to be repaid using the 4 time factors when
P 15,400 was invested from January 05, 2012 to December 15 on
the same year at 6¼% simple interest rate.

1) Ordinary Interest, Actual time

2) Exact Interest, Actual time

3) Ordinary Interest, Approximate time

4) Exact Interest, Approximate time

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 29
Tagudin Campus
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MODULE
29

B. Using Banker’s Rule, answer the following problems.

1) A loan was contracted from March 05 to December 10, 2012 on

the same year on for an amount of P 25,400 at 8½ %. Find the
interest and further determine the maturity value (F).

Given Data: Solution:

Required:
Is = ?
F=?

2) Find the interest at 8% and the accumulated amount (F) that

would be due if P 35,600 is invested in a bank from October 05,
2012 to March 08, 2013.

Given Data: Solution:

Required:
Is = ?
F=?

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 30
Tagudin Campus
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MODULE
30

C. Complete the missing data on the following table. Use ordinary

interest if time is given in days.

Principal Rate Time Simple Interest Maturity Value

(P) (r) (t) (Is) (F)

1. P 11,500 5¾% 10 months

2. P 8,400 4% 1 yr., 2 mo.

3. P 6,700 5% 145 days

4. P15,905 8¼% 204 days

5. P105,200 6½% 4½ months

6. P 206,150 51/3% 2 years

7. P 65,420 9% 5 months

8. P 50,600 6.75% 1¾ years

9. P 28,400 10% 2½ years

10. P 85,740 8.2% 3 yrs., 3 mo.

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 31
Tagudin Campus
COLLEGE
MODULE
31

Name: Score:
Course & Year: Date:

WORKSHEET No. 5-Lesson 5

Solve the following completely.
a. Discount P 90,120 for 3 years at 8½ % of simple discount.

b. Determine the simple discount rate if P 9,500 is the present value

of P 11,500 and the amount is due in 5 months.

c. When is the amount due if the discount on P 25,800 is P 4,500 at

8%?

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 32
Tagudin Campus
COLLEGE
MODULE
32

d. Determine the discount if one borrows P50,000 at 11% simple

discount for 2 years and 6 months?

e. Suppose the present value of P38,000 is P21,500 at 12% simple

discount, when is the amount due?

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 33
Tagudin Campus
COLLEGE
MODULE
33

Name: Score:
Course & Year: Date:

WORKSHEET No. 6-Lesson 6

Limel Joy borrowed P 12,000 from the SSS covering one year term and
was charged 5% discount interest rate. Determine the proceeds of the
loan that she received.

Given Data: Solution:

Required:

1. Find the discount interest (Id) and proceeds (P) if F = P50,400; d =

9% and t = 9 months.

Given Data: Solution:

Required:

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an
 ILOCOS SUR
POLYTECHNIC STATE 34
Tagudin Campus
COLLEGE
MODULE
34

END OF THE MODULE

REFERENCES

Capitulo, Florante M. and C.U. Cruz, Mathematics of

Investment (A Simplified Approach) 2nd ed.
Mandaluyong City: National Book Store, 1990.

Fajardo, Max B. Jr., Mathematics of Investment.

Philippines Copyright, 2000.

Gabriel, Presentacion B. and Anita C. Ong,

Fundamentals of Investment Mathematics.
Manila: Island Publishing House, Inc., 1994.

Hernandez, Rogelio M. et al. Mathematics of

Investment: Workbook with Tables. Pasig City:
Academic Publishing Corporation, 1995.

Sta. Maria, Antonina C. et al. Mathematics of

Investment. Manila: National Book Store, Inc.,
1988.

Course Code: Math 153

Descriptive Title: Mathematics of Invsetment
Instructor: Mr. Lito W. Binay-an