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Simple Interest: I PRN I 100000 ( (0.045) ) ( (3) ) Pesos

- Simple interest is directly proportional to the principal amount borrowed and the length of time the money is borrowed. It is calculated as Interest = Principal x Rate x Time. - Three examples are given to demonstrate calculating simple interest for scenarios involving borrowing principal over different periods of time at given interest rates, as well as calculating the principal amount based on a known interest amount.

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MARK KEVIN GUTIERREZ
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186 views4 pages

Simple Interest: I PRN I 100000 ( (0.045) ) ( (3) ) Pesos

- Simple interest is directly proportional to the principal amount borrowed and the length of time the money is borrowed. It is calculated as Interest = Principal x Rate x Time. - Three examples are given to demonstrate calculating simple interest for scenarios involving borrowing principal over different periods of time at given interest rates, as well as calculating the principal amount based on a known interest amount.

Uploaded by

MARK KEVIN GUTIERREZ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SIMPLE INTEREST

- Interest directly proportional to the length of time and the amount of


principal borrowed.

INTEREST - Amount of money earned by a given capital.

Example #1: A businessman loan ₱ 100 000.00 from a bank offering 4.5% interest rate
per year. How much is the accumulated interest if the businessman is planning to pay
it after 3 years?

I ＝ Prn

I ≔ 100000 ((0.045)) ((3))

I = 13500 pesos

*** Ordinary Simple Interest


n
I ＝ Pr ⋅ ―― Computed on the basis of one banker's year.
360
1 banker's year = 12 months (30 days each) = 360 days
*** Exact Simple Interest
Computed based on exact number of days
n
I ＝ Pr ⋅ ――
366 1 year = 365 days (ordinary year)
= 366 days (leap year)
n
I ＝ Pr ⋅ ――
365

Example #2: Determine the ordinary and exact simple interest on ₱ 5 000.00 for the
period from January 15 to June 20, 1993, if the rate of simple interest is 14%.
Example #2: Determine the ordinary and exact simple interest on ₱ 5 000.00 for the
period from January 15 to June 20, 1993, if the rate of simple interest is 14%.

January 15-31 =16 days Ordinary Simple Interest


February = 28
March = 31 n
I ＝ Pr ⋅ ――
April = 30 360
May = 31
June 1-20 = 20 156
I ≔ 5000 ((0.14)) ⋅ ――
TOTAL DAYS = 156 DAYS =n 360
I = 303.333 pesos

Ordinary Simple Interest


n
I ＝ Pr ⋅ ――
365

156
I ≔ 5000 ((0.14)) ⋅ ――
365
I = 299.178 pesos

SIMPLE INTEREST

Where: F = accumulated amount or future worth


P = principal amount of present worth
i = simple interest rate
n = number of interest period

Example #3: Kathy buys a television set from a merchant who asks ₱ 1 250.00 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?
Example #3: Kathy buys a television set from a merchant who asks ₱ 1 250.00 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?

F ＝ P ((1 + ni))
⎛ ⎛ 60 ⎞⎞
1250 ＝ P ⎜1 + ⎜―― ⋅ 0.08⎟⎟
⎝ ⎝ 360 ⎠⎠

1250
P ≔ ――――――
⎛ ⎛ 60 ⎞⎞
⎜1 + ⎜―― ⋅ 0.08⎟⎟
⎝ ⎝ 360 ⎠⎠

P = 1233.553 pesos

Example #4: Your neighbor borrowed ₱ 120 000.00 from your mother with simple
interest rate of 6%. How much will your neighbor pay at the end of 9 months? How
about at the end of 1 year and 9 months?

At the end of 9 months:

F ＝ P ((1 + ni))
⎛ ⎛ 9 ⎞⎞
F ≔ 120000 ⎜1 + ⎜― ⋅ 0.06⎟⎟
⎝ ⎝ 12 ⎠⎠
F = 125400 pesos

At the end of 1 year and 9 months:

F ＝ P ((1 + ni)) 12 + 9 = 21 months


⎛ ⎛ 21 ⎞⎞
F ≔ 120000 ⎜1 + ⎜― ⋅ 0.06⎟⎟
⎝ ⎝ 12 ⎠⎠
F = 132600 pesos

Example #5: A loan was made 3 years and 4 months ago at 6% simple interest. The
principal amount of the loan has just been repaid along with 800 pesos of interest.
Compute the principal amount of the original loan.
Example #5: A loan was made 3 years and 4 months ago at 6% simple interest. The
principal amount of the loan has just been repaid along with 800 pesos of interest.
Compute the principal amount of the original loan.

I ＝ Prn
3 ((12)) + 4 = 40 months
⎛ 40 ⎞
800 ＝ P ((0.06)) ⎜―⎟
⎝ 12 ⎠

800
P ≔ ―――
40
0.06 ⋅ ―
12

P = 4000 pesos

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