Business Mathematics

Quarter 1 – Module 9
PREPARED BY:

ROMEO L. DESIAR JR.

SUBJECT TEACHER

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Business
Mathematics
Quarter 1 – Module 9:
Solving Problems on Simple
Interest

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 What I Need to Know

Hi there! Many find it difficult to solve problems involving simple interest. But
you know what? Solving problems on simple interest can be easy. Yes, it can be!

In this module, you will be able to:

compute interest specifically as applied to mortgage, amortization and on
services/utilities and on deposits and loans.

Specifically, you are expected to:

1. understand the concepts of interest;
2. differentiate mortgage from amortization, services from utilities, and
deposits from loans; and
3. compute interest specifically as applied to mortgage, amortization,
services/utilities, deposits and loans.

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 What I Know

Before we start our lesson, let us check your prior knowledge

about solving problems involving simple interest.

Direction: Encircle the letter of the correct answer.

1. What is the product when the principal amount is multiplied by the interest
rate and the number of years?
a. compound interest
b. simple interest
c. diminishing interest
d. complicated interest

2. What is the amount due and payable to the holder of a financial obligation
as of the maturity date of the obligation?
a. principal amount
b. monthly amortization
c. mortgage
d. maturity value

3. How many days are used when ordinary interest is applied?

a. 360
b. 362
c. 364
d. 365

4. In computing for the interest, which among the following variables is NOT
included?
a. principal amount
b. rate
c. paid loan
d. time

5. What is defined as the charge for the privilege of borrowing money?

a. interest
b. withdrawal
c. deposit
d. credit

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6. What is described as a loan, secured by a collateral, that the borrower is
obliged to pay at a specific term?
a. amortization
b. loan
c. deposit
d. mortgage

7. What is the transaction involving a transfer of money to another party for

safekeeping?
a. loan
b. deposit
c. principal amount
d. amortization

8. What is the process of diminishing the amount or total in regular lesser

amounts?
a. mortgage
b. deposit
c. amortization
d. loan

9. What is defined as money (or property) given with the promise that it will be
paid back in the future, usually with interest?
a. deposit
b. collateral
c. loan
d. promissory note

10. What is described as professional support to aid customers?

a. utilities
b. foundation
c. services
d. product

11. Ronel wants to start an online business. How much interest will he have to
pay if he will borrow an amount of ₱50,000.00 from a bank payable for two
years at a simple interest rate of 6.5% per year?
a. ₱5,000.00
b. ₱5,500.00
c. ₱6,000.00
d. ₱6,500.00

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12. Danny deposited P150,000.00 in a bank. What is the maturity value of
Danny’s money in three years if the bank offers a simple interest of 1% per
annum?
a. ₱150,500.00
b. ₱152,500.00
c. ₱154,500.00
d. ₱155,500.00

13. Juan Dela Cruz wanted to purchase a car. The bank offered him a car loan
amounting to ₱1,200,000.00 payable within 4 years with a simple interest
rate of 8.2% per annum. What is the maturity value of the loan?
a. ₱1,592,500.00
b. ₱1,593,600.00
c. ₱1,594,700.00
d. ₱1,595,800.00

14. If a house is sold for P3,000,000.00 and the bank requires 20% down
payment, what is the amount of mortgage?
a. ₱2,400,000.00
b. ₱2,500,000.00
c. ₱2,600,000.00
d. ₱2,700,000.00

15. Using exact interest, what is the amount due (maturity value) if ₱20,000.00
is invested at 9% simple interest for 150 days?
a. ₱20,639.73
b. ₱20,739.73
c. ₱20,839.73
d. ₱20,939.73

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 Lesson
Solving Problems on Simple
9 Interest
In this module, you will be taught on how to solve problems involving simple
interest. Let us now begin!

What’s In

From the previous modules, you have learned about percent, mark-up,
markdown, mark-on, and solved problems involving buying and selling. Let us see
what have you learned from the previous topics.

Activity 1: Let’s Play Detective! Direction: Decode the scrambled words through
Atbash Cipher. Tell something about the word you decoded. Refer to the
key for guidance. Do your best and good luck!

SCRAMBLED WORD DECODED WORD

YFHRMVHH BUSINESS
IZGV
NZIPFK
KVIXVMG
WRHXLFMGH
YFBRMT ZMW HVOORMT

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 What’s New

How do you find the activity? Are not you excited to learn new things? They say
that knowledge is power. The more knowledge you gain the powerful you get.
Do not you agree? Try this activity and aim to get further enhance your knowledge.
Let us go!

Activity 2: Who Am I?

Direction: Identify the I (interest), P (principal amount), r (rate), and t (time) in every
problem involving simple interest. Write your answers on the spaces
provided.

1. A 2-year loan of ₱50,000.00 is made with a simple interest rate of 4% per year.
Find the interest earned.

I = _______ P = _______ r = _______ t = _______

2. A total of ₱120,000.00 is invested at a simple interest rate of 6% monthly for

4 months. How much interest is earned on this investment?

I = _______ P = _______ r = _______ t = _______

3. An investor gained an amount of ₱11,200.00 in 2 years after investing his

money at an annual simple interest rate of 7%. How much money did he
invest?

I = _______ P = _______ r = _______ t = _______

4. How long will 1 million pesos earn a simple interest of ₱100,000 at 1% per
annum?

I = _______ P = _______ r = _______ t = _______

5. If an entrepreneur applies for a loan amounting to P500,000.00 in a bank, the

simple interest of which is ₱157,500 for 3 years, what interest rate is being
charged?

I = _______ P = _______ r = _______ t = _______

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 What is It

There, you can now identify different variables involving simple interest. With
this, it is now simpler to solve problems involving interest wherever it is applied. Just
remember the key words and it will come easily.

Our main goal in this module is for you to solve problems involving simple
interest. But before we discuss how to solve such problems, let us define first the
following terms:

A deposit is a financial term that means money is held at a bank. It is a

transaction involving a transfer of money to another party for safekeeping.

A loan is a money (or property) given with the promise that it will be paid back
in the future, usually with interest.

Services are professional support to aid customers. This is sometimes

described as the intangible product.

Utilities refer to the basic amenities like electricity and water.

Mortgage is a loan, secured by a collateral, that the borrower is obliged to pay

at specified terms.

Amortization is the process of reducing a cost or total in regular small

amounts.

Interest is described as the money paid regularly at a particular rate for the
use of money lent, or for delaying the repayment of a debt.

Principal is the original amount invested or borrowed.

Rate is the amount of a charge or payment (usually in percent) with reference

to some basis of calculation.

Time can be defined as the duration or term used in solving simple interest.

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 At this point, let us deepen your understanding on how to solve problems
involving interest. Let us have the following examples:

A. Matoy started his small business by borrowing an amount of ₱20,000.00

payable for 3 years as a simple interest rate of 8% annually. How much is the
interest that he has to pay?
Simple Interest (I):

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 × 𝑟𝑎𝑡𝑒 × 𝑡𝑖𝑚𝑒

𝑰 = 𝑷𝒓𝒕
Given:
𝑰 =?
𝑷 = ₱20,000.00
𝒕 = 3 𝑦𝑒𝑎𝑟𝑠
𝒓 = 8%

Solution:
𝑰 = 𝑷𝒓𝒕
𝑰 = (₱20,000) (0.08) (3)
𝑰 = ₱𝟒, 𝟖𝟎𝟎. 𝟎𝟎

B. Meena was given ₱200,000.00 by her parents and she deposited it in a bank.
Find the maturity value of Meena’s money in five years if the bank offers a
simple interest of 1% per annum.
Maturity Value (F):

𝐹 = 𝑃 (1 + 𝑟𝑡)
𝐹=𝑃+𝐼
Given:
𝑭=? 𝑷 = ₱200,000.00
𝒓 = 1% 𝒕 = 5 𝑦𝑒𝑎𝑟𝑠

Solution:
𝑭 = 𝑷 (𝟏 + 𝒓𝒕)
𝑭 = ₱200,000 [1 + (0.01) (5)]
𝑭 = ₱𝟐𝟏𝟎, 𝟎𝟎𝟎. 𝟎𝟎

C. Dereck borrowed ₱2,200,000.00 payable for 5 years to purchase a pick-up

truck. A bank offered him a car loan with simple interest rate of 6.75% per
year. What is the maturity value of the loan?

Given:
𝑭=? 𝑷 = ₱2,200,000.00

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 𝒓 = 6.5% 𝒕 = 5 𝑦𝑒𝑎𝑟𝑠

Solution:
𝑭 = 𝑷 (𝟏 + 𝒓𝒕)
𝑭 = ₱2,200,000 [1 + (0.065)(5)]
𝑭 = ₱𝟐, 𝟗𝟏𝟓, 𝟎𝟎𝟎. 𝟎𝟎
D. If a house and lot is sold for ₱4,000,000.00 and the bank requires 25% down
payment, find the amount of mortgage.

Mortgage:
Down payment = down payment rate × cash price
Amount of the loan (mortgage) = cash price − down payment

Given: down payment = ? cash price =

₱4,000,000.00 mortgage = ? down payment
rate = 25%

Solution:

𝐷𝑜𝑤𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = 0.25 × ₱4,000,000

= ₱𝟏, 𝟎𝟎𝟎, 𝟎𝟎𝟎. 𝟎𝟎

𝑀𝑜𝑟𝑡𝑔𝑎𝑔𝑒 = ₱4,000,000 – ₱1,000,000

= ₱𝟑, 𝟎𝟎𝟎, 𝟎𝟎𝟎. 𝟎𝟎

E. Using ordinary interest, what is the amount due (maturity value) on

₱40,000.00 invested at 10% simple interest for 6 months. Assume that 1
month is equal to 30 days.

For Ordinary Interest: I = P × (r/360) × t

Given:
I=? P = ₱40,000
r = 10% t = 6months or 180 days

Solution:

𝑰 = ₱40,000 (0.1/360) (180)

= ₱𝟐, 𝟎𝟎𝟎. 𝟎𝟎

𝑭=𝑃+𝐼
= ₱40,000 + ₱2,000
= ₱𝟒𝟐, 𝟎𝟎𝟎. 𝟎𝟎

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 What’s More
OK! The activities challenge us mentally but you have to admit that it is
pretty remarkable how things work in business world. Right now, you have
acquired a lot of skills on how to solve problems in different situations. So, try to
solve the following problems in the next activity.
Activity 3: Using the Correct Formula

Direction: In this activity, you will be given the correct formula to use in order to
solve the problem.

1. Pepito purchases an SUV worth ₱1,200,000, the bank requires a minimum

amount of 20% down payment. How much is the down payment?
Formula: DP = rate × cash price

2. A bank offers 0.25% annual simple interest rate for a particular deposit. How
much interest will be earned if 1 million pesos will be deposited in his savings
account for 1 year?
Formula: I = Prt

3. When investing at an annual interest rate of 7%, the earned ₱11,200 of simple
interest in two years. How much money was originally invested?
Formula: P = I/rt

4. If an entrepreneur applies for a loan amounting to ₱500,000 in a bank, the

simple interest of which is P 157,500 for 3 years, what interest rate is being
charged?
Formula: r = I/Pt

5. Find the exact interest on a loan of ₱59,580 at 8.5% annually for 40 days.
Formula: I = P × (r/365) × t

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 What I Have Learned

Let us check what have you learned. Do this activity and answer,
and be one of the elites!

Activity 4: Give Me Your Idea

Direction: Write your ideas about the lesson you have just taken. Write your answers
on the space provided.

1. What is the difference between mortgage from amortization, services from

utilities, and deposits from loans.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

2. How can you identify the formula to be used in solving problems involving
simple interest? You can cite keywords if you want.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

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 What I Can Do

Now, here is another activity that will enable you to apply the
lesson on reallife situations.

Activity 5: What’s the Problem?

Direction: Solve the following problems involving interest using the right formula to
get the correct answer. List first the given from the problem and show your
solutions on the space provided and write your final answer on the blank.

1. Keith borrowed an amount of ₱50,000.00 from the bank. How much interest
will he have to be pay on the loan for 3 years at a simple interest rate of
7.5% per year?

Solution:

Answer: _________________

2. Pedro has been saving his lunch money and it reached an amount of
₱30,000.00 To secure his money and gain a small interest, he deposited it in
the bank. How much is Pedro’s money after ten years if the bank offers a
simple interest of 1.5% per annum.

Solution:

Answer: _________________
3. Popsie started a school bus business using a van worth ₱3.2M. He got a car
from a bank with a simple interest at a rate of 5% per year. What is the
maturity value of the loan after 5 years?

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 Solution:

Answer: _________________

4. As newlyweds, Mr. And Mrs. Sanchez wanted to purchase their dream house
worth ₱5,000,000.00 and the bank requires 15% down payment, find the
amount of mortgage.

Solution:

Answer: _________________

5. Using ordinary interest, what is the future value on a ₱125,000.00 invested at

9% simple interest for 5 months. Assume that 1 month is equal to 30 days.

Solution:

Answer: _________________

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 Assessment

Great Job! Let us test what you have learned from the very start of
our lesson.

Direction: Encircle the letter of the correct answer.

1. What is described as the professional support rendered to aid customers?

a. utilities
b. foundation
c. services
d. product

2. How many days are used when ordinary interest is applied?

a. 360
b. 362
c. 364
d. 365

3. What is result when the principal amount is multiplied by the interest rate
and the number of years?
a. compound interest
b. simple interest
c. diminishing interest
d. complicated interest

4. What is defined as the charge for the privilege of borrowing money?

a. interest
b. withdrawal
c. deposit
d. credit

5. What is the amount due and payable to the holder of a financial obligation
as of the maturity date of the obligation?
a. principal amount
b. monthly amortization
c. mortgage
d. maturity value

6. In computing for the interest, which among these variables is not included?
a. principal amount

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 b. rate
c. paid loan
d. time
7. What is described as a loan, secured by a collateral, that the borrower is
obliged to pay at specified terms?
a. amortization
b. loan
c. deposit
d. mortgage

8. It is defined as a financial term that means money held at a bank. Also is a

transaction involving a transfer of money to another party for safekeeping.
a. loan
b. deposit
c. principal amount
d. amortization

9. What is the process of diminishing the amount or total in regular lesser

amounts?
a. mortgage
b. deposit
c. amortization
d. loan

10. What is defined as the money (or property) given with the promise that it will
be paid back in the future, usually with interest?
a. deposit
b. collateral
c. loan
d. promissory note

11. Mr. Rivera wanted to start an online business on a loan of P 1000,000.00.

How much interest will he have to be pay on a loan for two years at a simple
interest rate of 6.5% per year?
a. ₱10,000.00
b. ₱11,000.00
c. ₱12,000.00
d. ₱13,000.00

12. Pedro Masunurin wanted to purchase a car. The bank offered him a car loan
amounting to ₱1,500,000 payable for 5 years at a simple interest rate of
8.2% per year. What is the maturity value of the loan?
a. ₱2,292,500.00

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 b. ₱2,115,000.00
c. ₱2,194,700.00
d. ₱2,195,800.00

13. Buboy deposited P300,000.00 in the bank. What is the maturity value of
Buboy’s money in three years if the bank offers a simple interest of 1% per
annum?
a. ₱309,000.00
b. ₱312,500.00
c. ₱314,500.00
d. ₱315,500.00

14. If a house is sold for P3,000,000.00 and the bank requires 10% down
payment, what is the amount of the mortgage?
a. ₱2,500,000.00
b. ₱2,600,000.00
c. ₱2,700,000.00
d. ₱2,800,000.00

15. Using exact interest, what is the amount due (maturity value) on P40,000.00
invested at 9% simple interest for 150 days?

a. ₱41,639.73
b. ₱41,739.73
c. ₱41,479.45
d. ₱41,939.73

Congratulations! You have done a great job! You are now done with this module
on Solving Problems Involving Simple Interest. I hope that you have enjoyed and
learned a lot. Now, get ready and be excited for the next module!

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 Additional Activities

Wow! You did a very good job! Solving problems involving Simple
Interest may be a little complicated but it is used in real life situations.
Enumerate real-life situations wherein solving Simple Interest can be applied.

1. _____________________________________

2. _____________________________________

3. _____________________________________

4. _____________________________________

5. _____________________________________

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