CHAPTER 1

MATHEMATICS OF FINANCE

LEARNING OUTCOMES:

 Introduce the use of simple interest to solve business problems

 Compare and contrast ordinary and exact simple interest
 Compare the basic concepts of simple and compound interest
 Develop mathematical skills on correct calculations of savings,
purchases and investment
 Introduce different nominal rates on making decisions for
investments and credit
 Define and discuss all types of simple annuity
 Discuss the easy way on how to find amount, and present value of
an annuity, unknown rate, unknown number of payments given
either the amount or present value of an annuity
 To distinguish the difference between amortization and sinking fund.
 To be able to apply the formulas in the amortization of a debt.
 To find the outstanding principal of a given debt.
 To be able to construct a sinking fund schedule.
 To compute for the sinking fund in debt extinction
 Define bonds and understand its nature
 Know how to find the premium, the purchase price, the discount, and
the purchase value of bonds
 Introduce the different types of insurance that can give assurance
and protection to the insured as well as the beneficiaries
 Enhance the ability to make wise decisions for security measures
 Introduce the different types of insurance with their respective
formulas for their premiums and which will help in making wise
decisions for security measures
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

INTRODUCTION

In a fast-growing economy, an enterprise highly needs efficient and effective

businessmen. Those are people who always think dynamically and critically
looking forward for the latest trend to rouse the activity of the business. In order
to stimulate, a business must build up capitals, upturn enterprise interest,
develop product lines; and all of these need extra money.

The businessmen may turn to banks or other similar financial institutions to meet
their business needs. The bank, for example, put in an amount of money in
supporting the businessmen and becomes the creditors or lenders and charges
an additional sum for the use of the money. On the other hand, the businessmen
become the debtors or borrowers and pay an additional sum for the use of the
money.

Still, there are some persons who borrow from other persons or financial
institutions to withstand their financial needs and also pay supplement for the
borrowed money. In other words, it is not only the man in the business who does
borrowing of money.

The price paid or the sum of money charged for the use of borrowed money is
called interest. In debtor’s point of view, interest is a fee paid while in lenders;
this interest is an income or money earned. Interest depends mainly upon three
factors: principal, which is the sum borrowed or invested; the time called term,
is the period for which the borrowed money is to be used(express in year);and
the interest rate which is the percentage of the interest received in a certain unit
of time to the sum borrowed and is an annual rate.

In mathematics of finance, there is an assumption that the money is always

invested productively; always growing, always producing interest. In this case,
both the borrower and the lender benefit.

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.1 SIMPLE INTEREST

Simple interest is the interest that is computed on the original principal

during the whole time or term of the loan, at the stated annual rate of interest.

Simple Interest is calculated by means of formula

I= Prt

Where:

I = interest P = principal r = rate t = time

EXAMPLE 1

A loan of P20000 is taken out. If the interest rate on the loan is 5%, how much is
the interest if the loan is due on 3 years?

Solution:
Given: P = P20000 r = 5% t = 3 years
I = Prt
I = (20000) (0.05) (3)
I = P 3000

EXAMPLE 2

Liza invests P14000 at 6% for 9 years. Find the simple interest.

Solution:
Given: P = P14000 r = 6% t = 9 years

I = Prt
I = (14000) (0.06) (9)
I = P 7560

EXAMPLE 3

What is the simple interest on P35800 at 8.2% for 3 years?

Solution:

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Given: P = P35800 r = 8.2% t = 3 years

I = Prt
I = (35800) (0.082) (3)
I = P 8806.8

EXAMPLE 4

After 2 year, how much will be the simple interest of the loan P20600
which yields 8%?

Solution:
Given: P = P20600 r = 8% t = 2 years
I = Prt
I = (20600) (0.08) (2)
I = P 3296

EXERCISE 1.1

Solve the following problems.

1. What is the simple interest of P1000 at 7.5% due on 3 years?
2. Mrs. Rodriguez borrows P75000 to Mr. Roy. She promised to pay it after
1
22 years with an interest of 12%. How much simple interests will Mr. Roy
received?
3. Mr. Simone deposits P80000 for 4% interest rate. If he withdraws it after 8
years, how much simple interest will he get?
4. Yeng put P10000 into an investment yielding 6%. She left the money in for
2 years. How much interest did she get?
5. Ren borrowed P45000 at 3% for 5 years. How much is the simple
interest?
6. Raquel borrowed P30000 at 9% interest for 4 years to buy a computer.
How much did she pay as an interest?
7. Dylan borrowed P112000 at a rate of 1.8% for 7 years. How much interest
did he pay?
8. Phoebe deposited P500000 into a savings account at a local bank that
1 1
earned 52of interest per year. How much interest will she earn after 102
years?
9. Kent owes P38000 with an interest rate of 4% in the student loans. If the
loan will be paid after 2 years. How much interest will he pay?
10. Find the simple interest of P18000 at 2.5% for 5 years.
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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.2 ORDINARY AND EXACT SIMPLE INTEREST

Simple Interest is commonly used in loans or investment for a short

duration of time, usual a year or less.
Simple Interest is commonly used in loans or investment for a short
duration of time, usual a year or less.
Computing simple interest, the time must be in years. But when the time is
given in months, then

number of months
t= 12

If the time is given in days, t can be expressed as (1) Ordinary Simple

Interest and (2) Exact Simple Interest.

Ordinary Simple Interest

number of days
t= 360

Exact Simple Interest

number of days
t= 365

EXAMPLE 1

If JP’s Company invested P150000 at 9% simple interest for 61⁄2 months. Find
the simple interest.

Solution:
Given: P = P150000 r = 9% t = 61⁄2
months

I = Prt
61⁄2
= (150000) (0.09) ( )
12
I = P 7312.50

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 2

Determine the ordinary and exact simple interest on a 180-days loan of P290000
at 12%.

Solution:
Given: P = 290000 r = 12% t = 180 days

Ordinary Simple Interest Exact Simple Interest

I = Prt I = Prt

(290000)(0.12)(180) (290000)(0.12)(180)
I= I=
360 365

I = P 17400
I = P 17162
Notice: Ordinary Simple Interest is always greater than the Exact Simple Interest.
Thus, it is favored by the lenders.

EXAMPLE 3

Lance put 14500 as an investment at 9% interest rate. How much interest did his
investment earn as the end of 11 months?

Solution:
Given: P = P14500 r = 9% t = 11 months

I = Prt
11
= (14500) (0.09) ( 12 )
I = P 1087.50

EXAMPLE 4

Mr. Yam borrows P31000 from a credit union which charges him 4% simple
interest for 129 days. Determine the ordinary and exact simple interest.

Solution
Given: P = 31000 r = 4% t = 129 days

Ordinary Simple Interest Exact Simple Interest

I = Prt I = Prt
(31000)(0.04)(129) (31000)(0.04)(129)
I= I=
360 365
I = P 444.33 I = P 438.25

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.2

Solve the following problems.

1. A man borrows P500 for four months at 9%. How much interest
must he pay?
2. On May 24, 2012, Ms. Agnes borrowed P65000 and agreed to
repay the loan together with the interest at 12% in 90 days. How
much is the ordinary simple interest?
3. Find the exact simple interest on P51000 at 18% for 30 days.
4. Precious borrows P100000 from Caleb which charges her 7.5%
simple interest for 95 days. Find the ordinary simple interest.
5. Using the information on no.4, find its exact simple interest.
6. Find the ordinary simple interest, if she invests P20550 yielding
15% simple interest at 24 days.
7. Mr. Y put P45000 as an investment yielding 10.5% interest rate.
How much interest will his money earn after 10 months?
8. Find the exact simple interest on P1450 at 6% for 75 days.
9. Ms. Tiffany borrowed P6450 due on 8 months. How much interest if
the rate is 14%
10. Ms. Rose loans P14500 from Ms. Tulip. She promised to pay it with
10% interest due on 49 days. How much interest will Ms. Tulip get?

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.3 THE PRINCIPAL

The principal (P) is computed by dividing the interest (I) by the rate
of interest (r) and the time (t).

Formula:

𝐈
Where: P = 𝐫𝐭

EXAMPLE 1.3.1

How much Mr. SD should invest so that his money will earns P295
at 5% for 6 months?
Solution
Given: I = 295 r = 5% t = 6
months

𝐈
P = 𝐫𝐭
295
= 6
(0.05)( )
12
P = P 11800

EXAMPLE 1.3.2

How much money invested if it earns P1443.75 in 270 days at 5%?

Solution
Given: I = 1443.75 r = 5% t =
270 days
𝐈
P = 𝐫𝐭
1443.75
= 270
(0.05)( )
360
P = P 38500
EXAMPLE 1.3.3

How much money borrows if it earns P1449 in 9 years at 7%?

Solution

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Given: I = 1449 r = 7% t = 9
years
𝐈
P = 𝐫𝐭
1449
= (0.07)( 9 )
P = P 2300

EXAMPLE 1.3.4

Ana invested money and produce a simple interest of P194.25 after

3 months. If its interest rate is 10.5%, how much is the principal?
Solution
Given: I = 194.25 r = 10.5% t = 3
months

𝐈
P = 𝐫𝐭
194.25
= 3
(0.105)( )
12
P = P 7400

EXAMPLE 1.3.5
Jose loaned money that earns P208 after 2 years. How money did
he borrowed, if the its rate is 4%?
Solution
Given: I = 208 r = 4% t = 2
years

𝐈
P = 𝐫𝐭
208
= (0.04)( 2 )
P = P 2600

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.3

Solve the following problems.

1. Julie earns P10000 at 4% interest after 3 years. How much money

did she invest?
2. Gabriella paid an interest of P1068.75 to a finance company at a
rate of 6.25% for 4.75 years. How much did she borrow?
1
3. Sam earns P450 in his savings account after 22 years. If it charges
4.5%, how much is her principal?
4. Jane owes the bank some money at 5% per year. After two years,
she paid P1250 as an interest. How much did she owe the bank?
5. A man took loan from a bank at the rate of 12% simple interest.
After 3 years he had to pay P5400 interest only for the period. The
principal amount borrowed by him was:
6. A sum fetched a total simple interest of P4016 at the rate of 9% in 5
years. What is the principal?
7. A certain amount earns simple interest of P1771 after 7 years. If the
rate is 11%, what is the amount?
8. Find the principal of P210 at 7% rate for one year.
1
9. Daisy paid P3380 at 5% simple interest after 62 years. How much
did she borrow?
10. What is the principal of P1500 at 9% for 4 months?

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.4 INTEREST RATE

To compute for the interest rate (r); divide interest (I) by the product
of principal (P) and the time (t).
𝐈
r = 𝐏𝐭

EXAMPLE 1.4.1

At what simple interest rate was P36000 invested if it earned P1200

for 2 months?
Solution
Given: I = 1200 P = 36000 t = 2
months

𝐈
r = 𝐏𝐭
1200
= 2
(36000)( )
12
r = 20 %

EXAMPLE 1.4.2

At what rate was P21600 invest if it earned P1440 for 200 days?
Solution
Given: I = 1440 P = 21600 t =
200 days
𝐈
r = 𝐏𝐭
1440
= 200
(21600)( )
360
r = 12 %

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.4.3

A loan of P8000 earned P440 within 6 months. Find the interest

rate.
Solution
Given: I = 440 P = 8000 t = 6
months

𝐈
r = 𝐏𝐭
440
= 6
(8000)( )
12
r =11 %

EXAMPLE 1.4.4

Jillian loaned P4500 and it accumulate P810 after 3 years. How

much is the interest rate?
Solution
Given: I = 810 P = 4500 t = 3
years

𝐈
r = 𝐏𝐭
810
= (4500)( 3 )
r=6%

EXAMPLE 1.4.5

No Corporation borrows P3100 payable after 7 months. If his

money earns P54.25 simple interest, how much is the rate of interest.
Solution
Given: I = 54.25 P = 3100 t = 7
months

𝐈
r = 𝐏𝐭
54.25
= 7
(3100)( )
12
r=3%

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.4

Solve the following problems.

1. Mrs. Joy Ongpauco borrows 5500 payable after 7 months. If her

money earns P500 simple interest, find the interest rate.
2. Mr.Lebron James borrowed 102000 to buy feeds for his piggery.
After 9 months, she paid 12500 as interest. Find the interest rate.
3. At what rate was 23000 invested if it earned 666 for 115 days?
4. After 3 months, Mr. Willie Nep paid 7500 interest for the sum of
money he borrowed at 80250 to buy seeds for his farm. Find the
interest rate.
1
5. At what rate will a borrowed sum of money charged if it earns of
5
itself as interest for 1 year and 9 months?
6. Mr.Ogie Diaz borrowed 95000 to buy feeds for his poultry. After 9
months, she paid 8500 as interest. Find the interest rate.
7. At what rate was 70590 invested if it earned 570 for 200 days?
8. Mr.Chiz Santiago borrows 4600 payable after 8 months. If her
money earns P125 simple interest, find the interest rate.
9. After 2 months, Mr. Shi Zu paid 750interest for the sum of money
he borrowed at 90780to buy seeds for his farm. Find the interest
rate.
10. At what rate was 4500 invested if it earned 230 for 2 months?

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.5 THE TIME

Likewise, to compute the time (t), the interest (I) must be divided by
the product of principal (P) and the interest rate (r).

𝐈
t = 𝐏𝐫

EXAMPLE 1.5.1

How long will it take P17000 to earn P5100 if the money is invested
at 10% simple interest?
Solution
Given: I = 5100 P = 17000 r =
10%

𝐈
t = 𝐏𝐫
5100
= (17000)( .10 )
t = 3 years
EXAMPLE 1.5.2

How long will it take P24000 to earn P7200 if the money is invested
at 6% interest rate?
Solution
Given: I = 7200 P = 24000 r = 6%
𝐈
t=
𝐏𝐫
7200
= (24000)( .06 )
t = 5 years

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.5.3

In how many months will P7500 earns P750 at 15% simple

interest?
Solution
Given: I = 750 P = 7500 r =
15%
𝐈
t = 𝐏𝐫
750
= (7500)( .15 )
t = 8 months

EXAMPLE 1.5.4

Lexi invested P12000 with 10% simple interest at D Company. How

many days will it take to earn P300?

Solution
Given: I = 300 P = 12000 r = 10%

𝐈
t = 𝐏𝐫
300
= (12000)( .10 )
t = 90 days

EXAMPLE 1.5.5

After how long will Mr. Peter’s money worth P1500 earns P180 with
an interest rate off 4%?
Solution
Given: I = 180 P = 1500 r = 4%

𝐈
t = 𝐏𝐫
180
= (1500)( .04 )
t = 3 years

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.5:

Solve the following problems.

1. In how many months will 20000 earn 2800 at 20 % simple
interest?
2. How long will it take 12400 to earn 546 if the money is invested
at 12% simple interest?
3. Money is invested at 15% simple interest. In how many months
will it take 11428 to earn 2300?
4. How long will it take 3500 to earn 300 if the money is invested at
16% simple interest?
5. In how many months will 45630 earn 12980 at 15% simple
interest?
6. Money is invested at 9% simple interest. In how many months
will it take 15000 to earn 3500?
7. How long will it take 7800 to earn 650 if the money is invested at
7% simple interest?
8. In how many months will 20000 earn 1050 at 5% simple
interest?
9. Money is invested at 6% simple interest. In how many months
will it take 13000 to earn 340?
10. How long will it take 8700 to earn 560 if the money is invested at
8% simple interest?

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.6 ORDINARY AND EXACT SIMPLE INTEREST FOR EXACT

AND APPROXIMATE TIME

In a loan transaction, if the two dates are given (date of the loan
and the date of payment) the interest can be computed in to approximate
and exact time. When using approximate time, we consider that every
month has 30 days while in exact time, we add the numbers of days
between the two dates (including the date of payment but not the date of
the loan).

Example: Determine the time from May 9, 2012 to September 17, 2012.
a. Computing approximate time, subtract the serials numbers of
the first date from the last date.
Year Month Day
September 17, 2012 2012 9 17
May 9, 2012 2012 5 9
4 8
Approximately, there are 4 months and 8 days before the
given date. To express in days, multiply the number of months to 30 days
then add the remaining days.
Approximate Time = 4(30) + 8
= 120 + 8
= 128 days
b. While in determining the exact time, there are 2 methods
1. Using Table 1, subtract the serial number of the 2
dates,
September 17 – 260
May 9 – 129

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

131 days
2. Determine the numbers of days from month to
month
May (10-31) 22
June 30
July 31
August 31
September 17
131 days
With the concept given, four types of simple interest can be
computed. These are: a. ordinary simple interest for approximate time, b.
exact simple interest for approximate time, c. ordinary simple interest for
exact time and d. exact simple interest for exact time.

EXAMPLE 1.6.1

Find the approximate number of days from June 15, 2009 to May 7,
2010.
Solution
Approximate time is 10 months and 22 days.
Ta= 10 (30) + 22
Ta = 322 days

EXAMPLE 1.6.2

Using the same given, find the exact time.

Solution
May 7 = 127 days of the year + 365 = 492
June 15 = 166 days of the year
326 days

EXAMPLE 1.6.3

Find the ordinary simple interest for exact time on P11500 at 9%

from October 10, 2010 to July 16, 2011.

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Solution
Computing for approximate time:
Year Month Day
July 16, 2011 2011 7(6+12=18)
16(30+16=46)
October 10, 2010 2010 10
10
8 36
Approximate time is 8 months and 36 days
Ta= 8(30) + 36
Ta= 276 days
Computing for exact time:
July 16, 2011 = 197 days of the year + 365 =
562
October 10, 2010 = 283 days of the year
Exact time = 279 days
Computing for ordinary simple interest for exact time:
Ioe = Prt
= (11500) (.09) (279) / 360
Ioe = P802.13

EXAMPLE 1.6.4

Find the ordinary simple interest for approximate time.

Solution
Ioa = Prt
= (11500) (.09) (276) / 360
Ioa = P793.5

EXAMPLE 1.6.5

Find the (a.) exact simple interest for exact time and (b.) exact
simple interest for approximate time.
Solution
1. Iee = Prt

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

= (11500) (.09) (279) / 365

Iee = P791.14

Days of Month Jan Feb March April May June July Aug Sept Oct Nov Dec

2. Iea = Prt
= (11500) (.09) (276) / 365
Iea = P782.63

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1 1 32 60 91 121 152 182 213 244 274 305 335

2 2 33 61 92 122 153 183 214 245 275 306 336

3 3 34 62 93 123 154 184 215 246 276 307 337

4 4 35 63 94 124 155 185 216 247 277 308 338

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

6 6 37 65 96 126 157 187 218 249 279 310 340

7 7 38 66 97 127 158 188 219 250 280 311 341

8 8 39 67 98 128 159 189 220 251 281 312 342

9 9 40 68 99 129 160 190 221 252 282 313 343

10 10 41 69 100 130 161 191 222 253 283 314 344

11 11 42 70 101 131 162 192 223 254 284 315 345

12 12 43 71 102 132 163 193 224 255 285 316 346

13 13 44 72 103 133 164 194 225 256 286 317 347

14 14 45 73 104 134 165 195 226 257 287 318 348

15 15 46 74 105 135 166 196 227 258 288 319 349

16 16 47 75 106 136 167 197 228 259 289 320 350

17 17 48 76 107 137 168 198 229 260 290 321 351

18 18 49 77 108 138 169 199 230 261 291 322 352

19 19 50 78 109 139 170 200 231 262 292 323 353

20 20 51 79 110 140 171 201 232 263 293 324 354

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

21 21 52 80 111 141 172 202 233 264 294 325 355

22 22 53 81 112 142 173 203 234 265 295 326 356

23 23 54 82 113 143 174 204 235 266 296 327 357

24 24 55 83 114 144 175 205 236 267 297 328 358

25 25 56 84 115 145 176 206 237 268 298 329 359

26 26 57 85 116 146 177 207 238 269 299 330 360

27 27 58 86 117 147 178 208 239 270 300 331 361

28 28 59 87 118 148 179 209 240 271 301 332 362

29 29 60 88 119 149 180 210 241 272 302 333 363

30 30 61 89 120 150 181 211 242 273 303 334 364

31 31 62 90 121 151 182 212 243 274 304 335 365

Table 1

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.6:

Ordinary simple interest for exact time

1. On September 5, 2012, Mrs. Chou borrowed 18000 at 12% simple

interest. If the loan was paid on Oct. 21, 2012, how much did she
pay?
2. A loan for 23000 with interest at 7% was made on January 22. Find
its interest on September 25 of the same year.
3. Benito borrowed 35000 on February 24 at 15% simple interest.
How much interest he pay on October 30 of the same year?
4. Using approximate time, find the exact interest on 62 520 from
November 13, 2010 to December 20, 2011 at 8 ½% simple interest.
5. Assuming 365-day year, find the simple interest rate for which
15200 earned 421 from July 15 to Nov. 17 of the same year. Use
approximate time.

For nos. 6-8.Find the exact number of days between the following
dates: (Use any of the two methods)
6. March 15, 2011 to December 21,2011
7. January 13, 2012 to August 25, 2012
8. May 10 to October 23

For nos. 9-10.Find the approximate number of days, given two

dates.
9. March 16, 2011 to October 9,2012
10. April 16,2011 to October 24,2011

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.7 THE FINAL AMOUNT

The final amount (S) is the amount due from investment. It is an

accumulated amount which represents the principal plus interest earned.

Formula:

Final amount can be define as

S=P+I

Since simple interest (I) is computed as I = Prt, S will be,

S = P + Prt

Now we can simplify and derived a formula for Final Amount

which is

S= P (1+rt)

EXAMPLE 1.7.1

Kevin borrows from Jersey the sum P36500 and promised to pay
the sum plus the interest at the end 6 months. If the money is worth 10%,
how much will Kevin pay Jersey at the end of the term?
Solution
Given: P = 36500 r = 10% t = 6
months
a. Method A (Find the I first, then solve for S)
I = Prt
6
= (36500) (0.10) ( 12 )
I = P 1825
S=P+I
= 36500 + 1825
S = P 38325

b. Method B (Using the derived formula)

S = P (1 + rt)

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

6
= 36500 (1 + (0.10) ( 12 ))
S = P 38325

EXAMPLE 1.7.2

Gail borrows P50000 to Kysler at 12% simple interest for 1 year

and 8 months. How much will Gail pay at the end of the term?
Solution
Given: P = 50000 r = 12% t = 1year & 8
months
S = P (1 + rt)
20
= 50000 (1 + (0.12) ( 12 ))
S = P 60000

EXAMPLE 1.7.3

How much money will he pays at the end of the term, if he borrows
P11000 at 4.5% simple interest for 2years?
Solution
Given: P = 11000 r = 4.5% t = 2
years
I = Prt
= (11000) (0.045) (2)
I = P 990
S=P+I
= 11000 + 990
S = P 11990

EXAMPLE 1.7.4

Kean loans P45100 to Courtney at 20% simple interest for 11

months. How much will Kean pay at the end of the term?
Solution
Given: P = 45100 r = 20% t = 11
months
S = P (1 + rt)
11
= 45100 (1 + (0.20) ( 12 ))
S = P 53368.33

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.7.5

Ana loans P150000 to Christian. She promised to pay it plus the

interest at the end of 3 months. If the interest rate is 2%, how much will
she pay?
Solution
Given: P = 150000 r = 2% t = 3 months
a. I = Prt
3
= (150000) (0.02) ( 12 )
I = P 750
S=P+I
= 150000 + 750
S = P 150750

b. S = P (1 + rt)
3
= 150000 (1 + (0.02) ( 12 ))
S = P 150750

EXERCISE 1.7

1. Mrs. Precious Hernandez loaned from Mrs.Mely Ramos the sum of

4500 and promised to pay the sum plus interest at the end of 7
months. If money is worth 15%, how much will Mrs. Precious
Hernandez pay Mrs.Mely Ramos at the end of the term?
2. Accumulate 5670 at 13% for 8 months.
3. Mr. Yellow loaned 78000 to buy additional raw materials for his
business. The bank charged 12% on the loan which is due at the
end of one year. How much is the accumulated amount?
4. A man invested 13500 worth 10 % for 9 months. How much was
the accumulated amount?
5. Accumulate 13600 at 8 % simple interest from April 18 to
November 20 of the following year.

26
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

6. Mr. Hawthorne invested 42000 and after 200 days, collected the
investment with a 12% simple interest. How much was the
accumulated amount?
7. Mr. Ortiz loaned from Mr.Ferrer the sum of P35000 and promised
to pay the sum plus interest at the end of 9 months. If money is
worth 11%, how much will Mrs. Ortiz pay Mr.Ferrer at the end of the
term?
8. A man invested 15300 worth 6 % for 10 months. How much was
the accumulated amount?
9. Accumulate 56750 at 13% for 2 years.
10. Mrs. Scarlet loaned 54000 to buy additional raw materials for his
business. The bank charged 15% on the loan which is due after 7
months. How much is the accumulated amount?

1.8 PRESENT VALUE

To discount S means to finds its present value (P) at a given

interest rate (r) for a given period of time (t). Computing its present value
at simple interest rate, the formula:

𝑺
Where: P = 𝟏+𝒓𝒕

EXAMPLE 1.8.1

What is the present value of P16500 due in 240 days if it is invested

at 10% simple interest?
Solution
Given: S = P16500 r = 10% t = 240 days
P = S / 1 + rt
P = 16500 / [1 + (.10) (240/360)]
P = P15, 468.75

27
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.8.2

Find the present value of P32000, which is due at the end of 6 months
at 14.5% simple interest.
Solution
Given: S = P32000 r = 14.5% or .145 t = 6
months
P = S / 1 + rt
P = 32000 / [1 + (.145) (6/12)]
P = P29, 836.83

EXAMPLE 1.8.3

Find the present value of P17000 due in 225 days at 8% simple

interest.
Solution
Given: S = P17000 r = 8% t = 225
days
P = S / 1 +rt
P = 17000 / [1 + (.08) (225/360)]
P = P16, 190.48

EXAMPLE 1.8.4

Find the present value of P53000 due in 11 months at 11% simple

interest.
Solution
Given: S = P53000 r = 11% t = 11 months
P = S / 1 + rt
P = 53000 / [1 + (.11) (11/12)]
P = P48, 145.34

EXAMPLE 1.8.5

A debt of P57500 is due 8 months from now. Allowing interest at 9%

simple interest, find the present value of the debt.

28
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Solution
Given: S = P57500 r = 9% t = 8 months
P = S / 1 + rt
P = 57500 / [1 + (.09) (8/12)]
P = P54, 245.28

EXERCISE 1.8

Solve the following problems.

1. Find the present value of P3500 due in 136 days if it is invested at

4% simple interest.
2. Discount P15136 for 98 days at 9% simple interest.
3. Jane deposited a certain amount in a bank which would accumulate
to P21340 at 14.2% simple interest at the end of 265 days. How
much did she deposit?
4. How much should a woman invest today in order to pay an account
worth P16000 at the end of 1 year if the bank gives 11% simple
interest?
5. A debt of P51200 is due 2 years from now. Allowing interest at
15.1% simple interest, find the present value of the debt.
6. Discount P2530 for 35 days at 2% simple interest.
7. Mario deposited a certain amount in a bank which would
accumulate to P141600 at 18% simple interest at the end of 2
years. How much did he deposit?
8. Find the present value of P925 due in 15 days if it is invested at 2%
simple interest.
9. A debt of P213140 is due 4 years from now. Allowing interest at
17% simple interest, find the present value of the debt.
10. How much should a man invest today in order to pay an account
worth P1340 at the end of 6 months if the bank gives 6% simple
interest?

29
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.9 DISCOUNT
The discount, or charge, is simply the difference between the
original amount owed in the present and the amount that has to be paid in
the future to settle the debt. Where discounting is a financial mechanism in
which a debtor obtains the right to delay payments to a creditor, for a
defined period of time, in exchange for a charge or fee. Essentially, the
party that owes money in the present purchases the right to delay the
payment until some future date.The discount is usually associated with
a discount rate, which is also called the discount yield.

BASIC CALCULATION OF DISCOUNT

The amount of the loan to be discounted is the total amount (S). To
find the amount of discount (D) multiply the total amount (S) by the given
rate of discount per annum (d) by the given term of discount in years (t).
By definition,

Where: D = Sdt

EXAMPLE 1.9.1

Consider the task to find the discount (D) of Ᵽ20000 for 3 years at a
simple discount of 20%.
Solution
Given: S = P20000 d= 20% t=3
D =?
D = Sdt
= (20000) (0.20) (3)
D = P 12000

EXAMPLE 1.9.2

Mr. Cueta loaned an amount of P50000 from a bank at 25%

discount rate for200 days.
Solution
Given:S = P50000 d = 25% t = 200 days D =?

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

D=Sdt
200
= 50000 (.25) (360)
D = P6944

EXAMPLE 1.9.3

If 6000, is discounted at 4.8% discount rate for 8 months, find the

discount.
Solution
Given: S = P6000 d = 4.8% t = 8 months
D =?
D=Sdt
8
= 6000 (0.048) (12)
D = P192

EXAMPLE 1.9.4

January 5 Amiery loaned P45000 at 8.9% discount interest. Find

the discount when she pay on March 1 of the same year.
Solution
Given: S = P45000 d = 8.9% or .089 t = 45
days D =?
D = Sdt
45
= 45000 (0.089) (360)
D = P501

EXAMPLE 1.9.5

P28000 borrowed by RnB Enterprises to Rock Bank for nine months

at a discount rate of 10.4%. What will be the discount if RnB returned the
money to Rock Bank?
Solution
Given: S = P28000 d = 10.4% t = 9 months
D =?
D = Sdt
9
= 28000 (0.104) (12)
D = P2184

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.9

1. What is the discount on P 104000 at 10% d.r for thirty-six months?

2. Compute the bank discount allowed on P80400 at 7% d.r for 460
days?
3. Mr. Mangulabnan loaned an amount of P35000 from a bank at 9% d.r
for 300 days. How much did he received after deducting the interest – in –
advance .
4. Find the discount on P 50000 at 12% d.r for 8 months.
5. What would be the discount if Mark loaned P480000 at 10% d.r for 200
days?
6. What is the discount on P60000 at 15% d.r for 12 months?
7. Compute on the discount on P 20000 at 7 ½ % for 1 year.
8. At 8% d.r what is the discount of P16000 for 6 months?
9. For 18 months what is the discount of P 18000 at 5%.
10. P12000 for ½ year at 6% what is the discount?

32
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.10 THE DISCOUNT RATE

The interest rate used in discounted cash flow analysis to

determine the present value of future cash flows. The discount rate takes
into account the time value of money (the idea that money available now
is worth more than the same amount of money available in the future
because it could be earning interest) and the risk or uncertainty of the
anticipated future cash flows (which might be less than expected).

From the formula for discount, D = Sdt, divide both sides of the
equality by the product of the final amount (S) and the term of discount (t).
Hence,

𝐷
Where: d = 𝑆𝑡

EXAMPLE 1.10.1

Find the discount rate on P78000 if the discount is P2340

discounted for 120 days.
Solution
Given: S = P28000 D = P2340 t = 120 days
d =?
𝐷
d = 𝑆𝑡
2340
= 120
78000 ( )
360
d = 0.09 or 9%

EXAMPLE 1.10.2

What will be the discount rate of P10500 to accumulate the

discount of P612.5 at 150 days.
Solution
Given: S = P10500 D = P612.5 t = 150 days d
=?

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

D
d = St
612.5
= 150
10500( )
360
d = 0.14 or 14%

EXAMPLE 1.10.3

What will be the discount rate of P20000 to accumulate the

discount of P1416.67 at 300 days?
Solution
Given: S = P20000 D = P1416.67 t = 300 days
d =?
𝐷
d = 𝑆𝑡
1416.67
= 300
20000 ( )
360
d = 0.085 or 8.5%

EXAMPLE 1.10.4

On October 12, 1994, Mrs. Cruz loaned P21000 from a credit and
savings association. The amount was discounted and the discount was
P857.50. Find the rate of discount allowed if Mrs. Cruz promised to settle
her credit on February 12, 1995.
Solution
Given: S = P21000 D = P857.50 t = 4 months
d =?
𝐷
d = 𝑆𝑡
857.50
= 4
21000 ( )
12
d = 0.12 or 12%

EXAMPLE 1.10.5

What will be the discount rate of P5000 to accumulate the discount

of P300 at 240 days. Assuming a 365-day a year?

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Solution
Given: S = P5000 D = P300 t = 240 days
d =?
𝐷
d = 𝑆𝑡
300
= 240
5000( )
365
d = 0.09 or 9%

35
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.10:

1. Find the rate of discount if P18750 is given a discount of P 484.5 for

1/3 of year?
2. On October 12, Mrs. Smith borrowed P 52800. If the loan was paid on
February 12 the following year with a discount of P 2079, what is the
discount rate was charge?
3. On June 10, Cherry borrowed P 50000. If the loan was paid on August
10 of the same year with a discount of P 2000, what is the discount
rate was charge?
4. Gajeel borrowed P 25000 on May 20, he obtained P2667 of discount.
What is the discount rate if he will pay the money at October 20 of the
same year?
5. Find the rate of discount if P 19500.50 is given a discount of P
2112.50 for 2 years.
6. Discount of P620 on Miss Ally’s borrowed money P11273. What is the
discount rate given of ½ year?
7. What is the discount rate of the discount P 4987 of P35200 money
given for 340 days?
8. At what discount rate was P18500 borrowed if the discount is P 555
for 120 days?
9. With a discount of P 1234 on a P 25600 given amount, what is the
discount rate given for 160 days assuming a 365- day a year?
10. P 12000 amount with a discount of P 2025 in 2 ½ years what is the
discount rate?

36
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.11 THE TERM OF DISCOUNT

From the formula for discount, D = Sdt, divide both sides of the
equality by the product of the final amount (S) and the discount rate (d).
Hence,

𝐃
Where: t = 𝐒𝐝

EXAMPLE 1.11.1

If P60000 is discounted at 6.5% how long it will take to accumulate

P2600 discount interest?
Solution
Given: S = P60000 D = P2600 d = 6.5%
t =?
𝐷
t = 𝑆𝑑
2600
= 60000 (0.065)
=0.67(12 months)
t = 8 months

EXAMPLE 1.11.2

To accumulate P6850.03, how long it will take if the discount is

P532.78 at 10% discount rate?
Solution
Given: S = P6850.03 D =P532.78 d =
10% t =?
𝐷
t = 𝑆𝑑
P532.78
= P6850.03 (0.10)
= 0.78 (12 months)
t = 9 months

37
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.11.3

After how long will P20, 600 borrowed money be returned if it is

1
given a P 2400 bank discount after a 72 % discount interest allowed?
Solution
1
Given: S = P20, 600 D =P1200 d = 72 %
t =?
𝐷
t = 𝑆𝑑
P2400
= P20600 (0.075)
= 1.55 (12 months)
t = 19 months

EXAMPLE 1.11.4

How long will it take P2400 to accumulate to P2544 if money is

invested at 8% discount rate?
Solution
Given: S = P2544 P = 2400 d=8%
t =?
𝐷
t = 𝑆𝑑
P2544−P2400
= P2544 (0.08)
= 0.708 (12 months)
t = 8 months

EXAMPLE 1.11.5

Mr. Rajin borrowed P6200 money, given P1240 bank discount after
8% d.r allowed. How many years will take?
Solution
3
Given: S = P6200 P = 1240 d =9 %
4
t =?
𝐷
t = 𝑆𝑑
P6200
= P1240 (0.0975)
t= 51 years and 3 months

38
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.11

1. How long if Spongebob borrowed P 10300 if it is given a P 600

bank discount after 8% d.r allowed?
2. Compute the days of 12% d.r with P 1200 discount if the money is
P18400.
3. Ms. Yannie loaned an amount of P40000 from a bank at 16% d.r
with the discount of P 5333. How long it will take?
4. Discount of P 3700 at 11% d.r, loaned money of P 60000. How long
would it take?
5. Joseph paid P 12000 for loaned he borrowed at 8% d.r with a
discount of P2000 When did he pay the money borrowed?
6. A debt of P 18500 at 9% d.r with a discount of P 1110. When will be
the due of the debt?
7. An obligation of P 19220 with a discount of P 834 at a discount rate
of 13% .How long will it take?
8. Discount of P336 at 6% discount rate (d.r) loaned money of
P11200. How long the money will due?
9. How long if Luigi borrowed P16800 if it is given at P 457 discount
after a 6 ½ d.r allowed?
10. An obligation of P 12 000 with a discount of P 2340 at a discount
rate of 9 ¾?

1.12 SOLVING FOR THE FINAL AMOUNT

Definition 1.12 To solve for the Final Amount (S), divide both sides
of the discount formula D = Sdt, by the product of the discount rate (d) and
the term of discount (t). Hence,

𝑫
Where: S = 𝒅𝒕

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.12.1

Find the maturity value due in 6 months discounted at 8.4% whose

discount is P4, 200.
Solution
Given: D = P4, 200 d = 8.4% t = 6
1
months = 2 year
𝑫
S = 𝒅𝒕
Ᵽ4,200
= 𝟏
0.084 ( )
𝟐
S=P 100000
EXAMPLE 1.12.2
A sum is discounted at 14% for 5 months and gives a discount of P
612.50. What is the total amount?
Solution
Given: D = P612.50 d = 14%% t = 5 months
𝑫
S = 𝒅𝒕
P612.50
= 𝟓
0.14 ( )
𝟏𝟐
S= P 10500
EXAMPLE 1.12.3
𝟑
Accumulate P19500 for 8 months at 8 𝟒 % discount rate?
Solution
𝟑
Given: D = P19500 d = 8 𝟒% t = 8
months
𝑫
S = 𝒅𝒕
P19500
= 𝟓
0.0875 ( )
𝟏𝟐
S= P 22285.71

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.12.4

Mr. Julius borrowed money discounted at 12% discount rate on

February 17 to August 17 of the same year and was given P240
discounts . Find the total amount of the money borrowed.
Solution
Given: D = P240 d =12% t = 180 days
𝐷
S = 𝑑𝑡
P240
= 180
0.12 ( )
360
S= P 4000
EXAMPLE 1.12.5

Commander Company loaned money to a bank and was given a

P300 discount at 6.5% discount rate on July 16 1994 to March 6 1995.
What is the total amount of the money loaned?
Solution
Given: D = P300 d =6.5% t = 260 days
𝐷
S = 𝑑𝑡
P300
= 260
0.065 ( )
360
S= P 6397

41
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.12

1. A certain amount is discounted at 9% discount rate for 205 days

and gives a discount of P340. Find the total amount.
2. How much loan should a man ask for from a bank which charges
10.5% discount rate for 165 days if he wants to pay an interest-in-
advance of P540?
3. Mr. Baccay borrowed money from the bank which charges 15%
discount rate for 8 months and an interest-in-advance of P1300.
How much did he borrowed?
4. Find the total amount of the money loaned by ABC Company if it is
charges 23% discount rate for 1 year and 3 months and a discount
of P56000.
5. What is the final amount if it is discounted at 5 % discount rate for
95 days and a discount of P135?
6. What is the final amount if it is discounted at 16.5% discount rate
for 240 days and a discount of P537?
7. Ms. Maligalig borrowed money from a bank and it charges 11%
discount rate for 7 months and a discount of P146. How much is
the final amount that she borrowed?
8. How much loan should Mr. Dy ask for from a bank which charges
13% discount rate for 11 months if he wants to pay a discount of
P2030?
9. Compute the final amount on P7450 discount at 9% discount rate
for 9 months.
10. A certain sum is discounted at 10.5% discount rate for 303 days
and gives a discount of P590. Find the total amount.

42
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.13 EQUIVALENT RATES

When two equal sums of money (P) invested at two different rates
for the same length of time yield the same final amount (S)then these two
rates are equivalent.

To find the simple interest rate equivalent to a given discount rate,

consider,

P
consider S = P (1+ rt) and S =
1−dt

From the definition of equivalent rates,

P
P (1+ rt) = 1−dt

Solving the equation, we obtain

𝐝
Where: r= 𝟏−𝐝𝐭

On the other hand, to find the discount rate equivalent to a given interest
rate,
P
Consider P = S (1+ dt) and P = 1+rt

From the definition of equivalent rates,

S
S (1- dt) = 1+rt

Solving the equation, we obtain

𝐫
Where: d= 𝟏+𝐫𝐭

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.13.1

What discount rate is equivalent to 12% simple interest for two

years?
Solution
Given: r = 12% t = 2 years
r
d= 1+rt
12%
= 1+0.12(𝟐)
d = 9.68%

EXAMPLE 1.13.2

What interest rate is equivalent to 10% discount rate for 9 months?

Solution
Given: d = 12% t = 2 years
d
r= 1−dt
10%
= 𝟗
1−0.10( )
𝟏𝟐
r = 10.81%

EXAMPLE 1.13.3
1
Interest rate of 9 2 % on 1996 to 1999. What is the equivalent
discount rate?
Solution
Given: r = 9.5%% t = 3 years
r
d= 1+rt
95%
= 1+0.095(𝟑)
d = 7.39%

EXAMPLE 1.13.4

With an interest rate of 8% for a sum which is due in January to

December the same year. What discount rate may be charged?
Solution
Given: d= 9.5%% t = 3 years
d
r= 1−dt

44
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

8%
= 1−0.08(1 𝑦𝑒𝑎𝑟)
r = 8.70%

EXAMPLE 1.13.5

For a sum which is due in 10 months from now, and with a

discount rate of 10%. What interest rate may be charged?
Solution
Given: r = 9.5%% t = 3 years
r
d=
1+rt
10%
= 10
1+0.10( )
12
d = 9.23%

EXERCISE 1.13

1. What simple interest rate is equivalent to 11% discount rate for 2

years?
2. What discount rate is equivalent to 7% interest rate for 1 year?
3. What discount rate is equivalent to 11.5% simple interest for 4
years?
4. What interest rate is equivalent to 9% discount rate for 11 months?
5. Find the discount rate that is equivalent to 3% simple interest for 1
year.
6. A certain amount is borrowed from a bank. What simple interest
rate is equivalent to 16 % discount rate for 7 months?
7. A loan due 1 year and 5 months from now is charged with a 6%
discount rate. What interest rate may be used to replace the 6%
discount rate?
8. A loan due 9 months from now is charged with an 18% simple
interest rate. What discount rate may be used to replace 18%
simple interest rate?
9. Mr. Cruz borrowed money from a bank and it charges 7% discount
rate for 270 days. What interest rate may be used to replace 7%
discount rate?
10. Ms. Julio borrowed money from a bank and it charges 13.5%
simple interest for 3 years. What discount rate may be used to
replace 13.5% simple interest rate?

45
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

1.14 PROMISSORY NOTE

A promissory note is an agreement by a person who borrows

money from another person who lends the money or just simply “promise
to pay.” It contains a maker (the payer) and a lender (the payee). An
unsecured promissory note is not attached to anything; the loan is made
based on the maker's ability to repay. A secured promissory note may also
be made based on the maker's ability to repay, but it is secured by a thing
of value such as a car or a house.

Inside the promissory note includes the date of the note, the
maturity date or the due date of the note, face of the note or the amount
written on the promissory note and the maturity value or the amount
borrowed plus the interest.

There are two types of promissory note:

 Non-interest bearing note- it includes the interest in the face

value.
 Interest-bearing note- states the rate of interest.

EXAMPLE 1.14.1
This is an example of non-interest bearing note and the maturity
value is the face of the note.

Obando, Bulacan
September 28, 2012

Nine months after the date, I promised to pay to the

order of Athena Dizon, fifteen thousand four hundred
ten pesos (P15410)

Kenji
Kenji Delos Reyes

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXAMPLE 1.14.2

This is an example of interest-bearing note.

Santa Mesa, Manila

March 15, 2011

One year and four months after the date, I promised to pay to the
order of Allan Guzman the amount of Twenty Five Thousand Six
Hundred Five Pesos (P25605) with interest at 15% annually.

Sarah
Sarah Villanueva

EXAMPLE 1.14.3

Mrs. Jang promised to pay to the order of Mr. Jung the amount of
P150000 with interest at 15% after eleven months. Six months after, Mr.
Jung sold the note to a bank which discounts it at 7% discount. How much
does Mr. Jung receive from the bank?
Solution
Given: P = P150000 r = 15% t = 11
months
S = P (1+rt)
11
= 150000[1+ (.15) (12)]
S = P170625
D = Sdt
5
= (170625) (.07) (12)
D = 4976.6
P = S-D
= 170625-4976.6
P = P165648.4

EXAMPLE 1.14.4

Mr. Cruz loaned P35000 on October 5, 2011 and promised to pay

after 250 days with interest at 12% simple interest. How much will Mr.
Cruz pay on the due date?
47
 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

Solution
Given: P = P35000 r = 12% t = 250 days
S = P (1+rt)
250
= 35000[1 + (.12) (360)]
S= P37916.7

EXAMPLE 1.14.5
Ms. Tolentino borrowed P27500 from Mr. Dimayuga with an interest
of 9%. She then promised to pay the amount after 10 months. Six months
after Mr. Dimayuga sold the note to a bank which discounted it at 6%
discount rate. How much did Mr. Dimayuga receive?
Solution
Given: P = P27500 r = 9% t = 10 months
S = P (1+rt)
10
= 27500[1+ (.09) (12)]
S = P29562.5
D = Sdt
4
= (29562.5) (.06) (12)
D = 591.25
P = S-D
= 29562.5 – 591.25
P = P28971.25

48
CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

EXERCISE 1.14

1. Ms. Marie promised to pay to the order of Mr. Sol the amount of
P60000 with interest at 10% after 11 months. 6 months after, Mr.
Sol sold the note to a bank which discounts it at 6% discount. How
much does Mr. Sol received from the bank?
2. Mr. Cruz loaned P40000 on October 12, 2011 and promised to pay
after 198 days with interest at 8% simple interest. How much will
Mr. Cruz pay on the due date?
3. Ms. Reneesme borrowed P11300 from Mr. Liloree with an interest
of 13%. She then promised to pay the amount after 8 months. 5
months after Mr. Liloree sold the note to a bank which discounted it
at 6% discount rate. How much did Mr. Liloree receive?
4. Mr. Cruz loaned P35000 on October 5, 2011 and promised to pay
after 10 months with interest at 12% simple interest. How much will
Mr. Cruz pay on the due date?
5. Mr. Cloud loaned P54000 on October 20, 2011 and promised to
pay after 65 days with interest at 7% simple interest. How much will
Mr. Cloud pay on the due date?
6. Mrs. Dela Cruz promised to pay to the order of Mr. Jung the
amount of P100000 with interest at 15% after eleven months. Six
months after, Mr. Jung sold the note to a bank which discounts it at
7% discount. How much does Mr. Jung receive from the bank?
7. Honey loaned P35000 on October 5, 2011 and promised to pay
after 85 days with interest at 6% simple interest. How much will
Honey pay on the due date?
8. Aliyah borrowed P14500 from Mr. Dimayuga with an interest of
10%. She then promised to pay the amount after 10 months. Six
months after Mr. Dimayuga sold the note to a bank which
discounted it at 6% discount rate. How much did Mr. Dimayuga
receive?
9. Romarie loaned P35000 on October 5, 2011 and promised to pay
after 250 days with interest at 12% simple interest. How much will
Romarie pay on the due date?
10. Julian promised to pay to the order of Moises the amount of
P150000 with interest at 15% after eleven months. Six months
after, Moises sold the note to a bank which discounts it at 7%
discount. How much does Moises receive from the bank?

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 CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

CHAPTER REVIEW

1. Find the interest earned by investing P7300 at 7% simple interest

for 3 years.
2. How long will it take P18000 to earn P9720 if the money is invested
at 9% simple interest?
3. Mrs. Cruz had an investment of P12000. After 2 months, her money
earns P160 simple interest. How much is the rate of interest?
4. How much should she invest so that her money earns P4004 at 7%
for 2 years?
5. Find the ordinary simple interest of P14700 at 8.5% for 132 days.
6. In what rate does P1500 will earn P45 simple interest due on 9
months?
7. Assuming a 365 day year. Compute the simple interest on P55000
at 16% for 180 days.
8. How much money is borrowed if it earns simple interest equal to
P11424 at 13.6% for 4 years?
9. In how many months will P135000 earn P4050 at 4.5% simple
interest?
10. Find the exact simple interest of P15000 at 9% for 225 days.
11. Using approximate time, how much P35000 at 2.5% will earn from
June 29, 2011 to July 31, 2012?
12. A loan for P67000 with interest at 12% was made on August 10.
Find its exact simple interest on December 13 of the same year.
13. Mrs. Joy loaned P125000 with a bank charged of 15% due on 4
years. How much is the accumulated amount?
14. Find the present value of P3000 due in 5 months if it is invested at
3 % simple interest.
15. Discount P81000 for 145 days at 11% simple interest.
16. What is the discount on P27000 for 8 months at 5% discount rate?
17. Compute the bank discount allowed on P33500 at 15% simple
discount for 190 days.
18. Find the rate of discount if P54000 is given a discount of P1500 for
18 months.
19. A certain amount is discounted at 15% discount rate for 230 days
and gives a discount of P350. Find the total amount.
20. What simple interest rate is equivalent to 7.5% discount rate for 1
year?
21. What discount rate is equivalent to 15.3% interest rate for 5 years?

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CHAPTER 1: SIMPLE INTEREST AND DISCOUNT

22. Mrs. Garcia loaned an amount of P50000 from a certain bank at

18% discount rate for 300 days. How much did she receive after
deducting the discount?
23. Mr. Guzman borrows P43500 from a bank which discounts at 11%
discount rate, the discount is P3600. Find the term of discount.
24. Mr. Fujisawa promised to pay to the order of Mr. Aoyama the
amount of P100000 with interest at 15% after 8 months. 5 months
after, Mr. Aoyama sold the note to a bank which discounts it at
7.5% discount. How much does Mr. Aoyama received from bank?
25. When will P33000 amount to P35000 at 12% discount rate?
26. Find the rate of discount if P5000 is given a discount of P300 for
240 days.
27. How long will it take P2400 to accumulate to P2544 if money is
invested at 8% discount rate?
28. Ms. Min borrows P15000 from a bank which discounts at 10%
discount rate, the discount is P500. Find the term of discount.
29. Find the rate of discount if P30000 is given a discount of P2500 for
13 months.
30. What simple interest rate is equivalent to 8% discount rate for 2
years?

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