Colegio de San Gabriel Arcangel

City of San Jose del Monte, Bulacan, Philippines

COLLEGE OF LIBERAL ARTS AND SOCIAL SCIENCES

Program : Bachelor of Arts In Psychology

Course code : GECO 4
Description : Mathematics In The Modern World

LAS #13
Name:______________________ Score :____________________
Date : _____________________ Section :____________________

Activity Title : Simple Interest, Simple Discount

Learning Target: 1. I Can illustrate simple Interest and Simple Discount.

2. I Can solve the principal. Interest rate and Time.

References : 1. Sirug, Winston S. Mathematics In the Modern World, Manila:

Mindshapers Co. Inc.
2.Anasin Gil. Module in Mathematics of Investment, Unpublished.

DISCUSSION:
Definition of Simple Interest
One advantage of paying cash for all your purchases is that you do not have to pay interest
charges. However, at times you must make purchases when you do not have the money on
hand, at other times; you choose to purchase something for which you do not have ready cash.
In these cases, you can go to a bank, savings and loan institution, loan company, or credit union
to borrow money.

In some cases, borrowing money to buy something means you will pay more for it than
you had paid cash. The difference between the amount you pay back and the cost of the item
is called the interest.

In most cases, Interest (I) is defined as payment made for the use of another person’s
money. It is regarded more specifically as a payment made for capital. Economists also consider
interest as the reward for thrift; that is, payment offered to people to encourage them to save
and to make their savings available to others. It is a percentage on the principal for a certain
period of time. The amount invested or borrowed is called the Principal (P).

The rate of interest is expressed as a percentage of the principal paid for its use for a
given time, usually a year. Thus, a loan of P1,000 at 10 percent per annum earns interest of P100
a year.

The current, or market, rate of interest is determined primarily by the relation between the
supply of money and the demands of borrowers. When the supply of money available for
investment increases faster than the requirements of borrowers, interest rates tend to fall.
Conversely, interest rates generally rise when the demand for investment funds grows faster than
the available supply of funds to meet that demand. Business executives will not borrow money
at an interest rate that exceeds the return they expect the use of the money to yield.
Simple Interest Formula

Interest (I) is a certain rate of interest (r) on the principal (P) for a certain period of time
(t). To compute for the simple interest, multiply the principal (P), by the rate of interest (r) and by
the length of time (t) expressed in years.

In symbols I = Prt
where I = interest on the principal
P = amount invested or borrowed
r = annual rate of interest
t = time expressed in years

Example 1: Mr Caballero borrowed P50,000.00 at the rate of 9% per annum payable

at the end of one year. Find the interest.

Solution: P = P50,000.00 r = 9% t = 1 year

I = Prt I = P50,000.00 (.09) (1)

I = P4,500.00

Example 2: Angeline invested P6,000.00 at 10% simple interest for 6 months. Find the
amount of simple interest.

6
Solution: P = P6,000.00 r = 10% t=
12

 6 
I = P6,000.00 (.10)  
 12 
I = P300.00

Example 3: Mark Louie invested P10,000.00 at 12% simple interest for 60 days. Find the
amount of simple interest.
60
Solution: P = P10,000.00 r = 12% t=
360

60
I = P10,000.00 (.12)
360
I = P200.00

Solving for the Principal (P)

From the simple interest formula, I = Prt, the formula for the principal (P) could be
derived by dividing both sides of the equation by the product of the rate of interest (r)
and the time (t). Hence,

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

Example 1: How much should Mr. Cervantes invest today so that his money earns
P250.00 at 6% for 10 months?

10
Solution: I = P250.00 r = 6% t=
12

I 250
P= P= P = P5,000.00
rt  10 
.06  
 12 

Example 2: After eleven months, an amount invested at 8% earned P17,600.00. How

much was invested?
11
Solution: I = P17,600.00 r = 8% t=
12

I 17, 600
P= P= P = P240,000.00
rt  11 
.08  
 12 
Example 3: Benedict invested certain amount at 10% for 3 years
and earned P27,000.00. How much did he invest?

Solution: I = P27,000.00 r = 10% t=3

I 27,000
P= P= P = P90,000.00
rt .10(3)

Solving for the Interest Rate (r)

To derive the formula for the interest rate ® simply divide each member of the equation
by the product of the principal (P) and time (t).

I
r=
Pt
Therefore, Interest rate (r) is equal to the Interest (I) divided by the product of the
Principal (P) and time (t).

Example 1: Mr. Puno invests, P32,000.00 for 5 months. If his money earned P1,600.00,
find the rate of interest.
5
Solution: I = P1,600.00 P = P32,000.00 t =
12
 I
r=
Pt

1, 600
r=
5
32, 000  
 12 

r = 12%

Example 2: Ms. Cutanda borrowed P32,400.00 to buy feeds for her poultry. After six
months, she paid P1,539.00 as interest. Find the rate of interest.

6
Solution: I = P1,539.00 P = P32,400.00 t=
12

I
r=
Pt

1,539
r=
 6
32, 400  
 12 
r = 9.5%

Solving for the Time (t)

Likewise, to derive the formula for the time (t) divide both sides of the equation by
I
the product of the Principal (P) and the interest rate (r). Hence, t= . Therefore, time
Pr
(t) is computed by dividing the Interest (I) by the product of the principal (P) and the rate
of interest (r).
Example 1: How long will it take P11,600.00 to earn P696.00if the money is invested at
8% simple interest?

Solution: I = P696.00 P = P11,600.00 r = 8%

I 696
t= t=
Pr 11,600(.08)

t = 0.75 or 9 months

Example 2: How long will it take P50,000.00 to earn P25,000 if invested at 16% simple
interest?

Solution: I = P25,000.00 P = P50,000.00 r = 16%

 I 25,000
t= t=
Pr 50,000(.16)

t = 3.125 or 3 years and 1 ½ months

Example 3: How long will it take P50,000.00 to double itself if invested at 6% simple
interest?

Solution: I = P50,000.00 P = P50,000.00 r = 6%

I 50,000
t= t=
Pr 50,000(.6)

t= 16.66 or 16 ⅔ years

If the resulting time is not exactly one year, express the fraction of one year in
terms of the number of months or the number of days. For example, the computed time
is 0.725 year then this is equivalent to 8 months and 21 days.

ACTIVITY 1

Name: ______________________________ Score: _____Rating: ______

Course, Yr. & Section: _______________ Date: ___________

Complete the table below

Interest Principal Rate Time

1. P1,500.00 6% 6 months

2. 5,600.00 5% 10 months

3. 9,000.00 8½% 2 ½ months

4. P81.00 4 ½% 9 months

5. P170.00 6% 4 months

6. P800.00 12% 240 days

7. P130.00 6,500.00 3 months

8. P840.00 16,000.00 7 months

 9. P278.20 7,200.00 214 days

10. P187.50 7,500.00 5%

ACTIVITIY 2
Name: ______________________________ Score: _____Rating: ______

Course, Yr. & Section: _______________ Date: ___________

Solve the following problems.

1. Ms. Napucao invested P20,500.00 in a bank which yield 16 ½% simple interest for 10 months.
Find the interest.

2. How long will it take the principal to double itself if invested at 12% simple interest?

3. Find the interest earned if P30,000.00 was invested at 12% simple interest for 2 ½ years.

4. At what rate was P2,160.00 invested if it earned P35.00 for 115 days?

5. Roberto borrowed P3,150.00 at 6% for 264 days. How much interest did he pay for the use of
money?

6. Jeric invested certain amount at 12% for 2 years and earned P24,000.00. How much did he
invest?

7. Mr. Kempis invested P6,200.00 which earned interest amounting to P520.00 for 11 months.
Find the rate of interest.