Dr. Carlos Lanting College – Senior High School The following table is useful in identifying the time period.

General Mathematics – 2nd Quarter JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Days 31 28 31 30 31 30 31 31 30 31 30 31
Mathematics of Interests
Total 31 59 90 120 151 181 212 243 273 304 334 365
Chapter 1: Simple and Compound Interest

Lesson 1.1: Loans, Credits, and Simple Interest Examples: Determine the time period of each loan, given by the following scenarios.

1. A note dated February 28 is due to be paid on August 1.

2. What is the due date for a 130-day note dated July 7?
Definition of Terms: 3. Determine the actual time and approximate time from March 3, 2015 to
1. Loan – is a money, property, or other material goods that is given to another party September 10, 2015.
in exchange of future repayment of the loan value along with interest of other 4. Find the actual and approximate time from November 18, 2015 to May 9, 2016.
finance charges. 5. What is the due date of a note for 115 days dated August 30?
2. Credit – is a contractual agreement in which a borrower receives something of a 6. Determine the number of days in a note dated March 28, due on December 8.
value now, and agrees to repay the lender at the same date in the future. 7. Find the actual and approximate time of the following dates
3. Interest – is the fee or rent that lenders charge to borrowers for the temporary use a. September 14 to April 17
of borrowed money. b. August 16 to December 8
4. Simple interest – it is calculated only on the original principal amount and paid at Determining Exact Interest and Ordinary Interest
the end of a given period. (commonly calculated on short term loans)
5. Promissory note – a legal document which a person or firm agrees to pay a certain 𝑫𝒂𝒚𝒔 𝒐𝒇 𝑳𝒐𝒂𝒏 𝑫𝒂𝒚𝒔 𝒐𝒇 𝑳𝒐𝒂𝒏
𝑬𝒙𝒂𝒄𝒕 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = 𝑶𝒓𝒅𝒊𝒏𝒂𝒓𝒚 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 =
amount of money, on a specific date. 𝟑𝟔𝟓 𝟑𝟔𝟎

Simple Interest Formulas

Determining the time period
P = Principal amount of the loan
Loan Date – First day of the loan.
r = Annual rate of simple interest (must be converted into decimal)
Due date (Maturity Date) – Last day of the loan.
t = Time period of the loan investment
To determine the span of the time period of the loan (Actual Time), we simply identify the
number of days between the loan date and due date. To determine the Approximate Time, I = amount of interest paid or received
we do the same process like how we determine the actual time, but instead of using the
actual number of days per month, we use 30 days per month. F = Maturity value of the loan or investment (total amount to be paid)
𝑰
𝟏. 𝑰 = 𝑷𝒓𝒕 𝟐. 𝑷 = 𝟑. 𝑭 = 𝑷 + 𝑰 𝟒. 𝑭 = 𝑷(𝟏 + 𝒓𝒕)
𝒓𝒕

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Example Set 1: Answer the following problems accurately. 14. Aaron makes an investment by lending P12,000 to Bartholome for 2 years at an
interest rate of 11% per annum. What is the value of the investment?
1. Find the interest on P28,700 at 7.3% from March 4, 2016 to August 16, 2016 using
15. Abel placed P18, 000 in a 240-day term deposit earning 8.5% per annum. How much
the following:
will the bank pay Abel on the maturity date?
a. Ordinary interest using actual time
16. If Adam borrowed P300, 000 from a commercial bank charging 16% simple interest,
b. Exact interest using approximate time
how much would she pay at the end of 3 years?
2. (PROBLEM SET 1 ITEM 1) What amount should be paid on January 13, 2016 for a
17. How much final amount would Abraham receive if he invests P100, 000 for 1 year
loan of P16,000 made on July 7, 2015 at 8% simple interest using the following:
and 3 months at 11% simple interest?
a. Ordinary interest using actual time
18. (PROBLEM SET 1 ITEM 4) Ruth borrowed P20, 000 at 11% interest for 150 days. On
b. Ordinary interest using approximate time
day 50, Ruth made a partial payment of P5,000. On day 80, she made a second
c. Exact interest using actual time
payment of P7,000. What is the final amount due on the loan?
d. Exact interest using approximate time
19. Rebecca owes P105, 000 on 6%, 135-day note. On day 35, she pays P45,000 on the
3. On August 6, Gaby went to the MSS bank and took out a loan for P85, 000 at 10%
note. What is the new maturity value of the loan?
ordinary interest for 90 days. What is the maturity value and the maturity date of
20. David owes P300, 000 on an 8%, 240-day note. On day 100, he paid P100,000 on the
the loan?
note. On day 200, he made additional P120,000 additional payment. What is David’s
4. Determine the exact and ordinary interest on P15, 800 at 12% from January 9, 2017
adjusted balance after day 100 and 200? What is the ending balance due?
to June 24 of the same year using actual and approximate time.
21. Deborah borrowed P175, 000 for 120 days at 15%. On day 30, Deborah made
5. Find the exact and ordinary interest on P17,600 at 9.5% from December 3, 2015 to
P50,000 partial payment. On day 70, made a P25,000 partial payment. What is
June 24, 2016 using actual and approximate time.
Deborah’s ending balance due?
6. (PROBLEM SET 1 ITEM 2) What amount of interest will be charged on P7,300
borrowed for 3 years at simple interest rate of 12% per annum?
7. Maria paid P9, 250 on a loan made for 6 months at 12% simple interest. Find the
interest generated.
8. Joseph borrowed P23, 700. After 3 years he paid back the loan with 8% interest.
How much was the interest paid?
9. (PROBLEM SET 1 ITEM 3) Find the interest paid by veronica on P35,000 that she
borrowed for 2 years at 15% simple interest.
10. If a nine-month term deposit at a bank under a simple interest rate of 9% per
annum, how much will have to be deposited to earn P255 of interest?
11. What is the present value of P5, 275 due in 6 months if 11% interest is paid?
12. The repayment of a loan was P13, 670. How much was the principal if the loan was
for 15 months at 12% interest a year?
13. If money is worth 12%, find the present value of P12, 680 due in 1 year and 6
Note: Underlined problems will serve as items for Problem Set #1 and should be
months.
submitted online the day after the first discussion of the examples.

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Lesson 1.2: Compound Interests To compute for 𝑛 and 𝑖 ,

The compound interest method is employed in virtually all instances where the duration 𝒋
𝒊= 𝒏 = 𝒕𝒎
exceeds one year, and it is also used for some short-term loans and investments. 𝒎

Definition of Terms

1. Compound Interest – is the procedure in which the interest is periodically Compound Interest Formulas:
calculated and added to the principal. 𝒓 𝒕𝒎 𝑭
2. Conversion Period/Compounding Period/Interval Period – the time interval 𝟏. 𝑭 = 𝑷 + 𝑰 𝟐. 𝑭 = 𝑷 (𝟏 + ) 𝟑. 𝑷 = 𝒓 𝒕𝒎
𝟒. 𝑰 = 𝑭 − 𝑷
𝒎 (𝟏+𝒎)
between succeeding interest calculations.
3. Compound Frequency/Conversion Frequency – The number of compounding that
takes place in a year.
Examples: Answer the following problems accurately.
Compounding Frequencies and Periods
1. What will be the maturity value of P12, 000 invested for 4 years at 15%
Compounding Frequency No. of Compounding/yr. Compounding Period compounded quarterly?
Annual 1 12 months
Semi Annual 2 6 months 2. Find the present value of P5,000 due in 6 years if money is worth 12% compounded
Quarterly 4 3 months semi-annually.
Bimonthly 6 2 months
Monthly 12 1 month 3. If money can be invested at 12% compounded semi-annually, find the present value
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of P1,000 due at the end of 5 years.
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4. Nominal Interest – the stated interest rate which the compound interest calculation 4.
is based.
5. Periodic Interest rate – rate of interest earned in one conversion period 5. Determine the maturity value of P3, 000 invested at 9.5% compounded
semiannually for 3 ½ years.
Compound Interest Formulas 6. Esther deposited P25, 000 in a savings bank on January 13, 2013. At that time the

F = Maturity value of the loan investment t = Time period bank was paying 4% interest, compounded quarterly. On July 13, 2015, the bank

P = Principal amount i = periodic interest rate announced that it would start paying 4.5% interest, compounded quarterly. How
much did Esther have on her credit on July 13, 2017?
I = Amount of interest n = Number of conversions of the loan
7. (PROBLEM SET 2 ITEM 1) Alexander borrows P47, 400 with interest at 18%
j = Nominal Interest rate
compounded quarterly. How much should he pay to the creditor after 3 years?
m = Number of conversions per year

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 8. Four years ago, Nathan invested P23, 900 compounded bimonthly at 12%. How 17. Find the interest charged on a loan of P8275 at 11% compounded quarterly.
much is his money now? 18. Find the compound interest on P13, 680 at 9% for 4 years compounded annually.
9. John deposited P48, 900 in a savings bank on February 28, 2010. At that time, the 19. Find the compound interest if P5,500 us invested at 8% compounded quarterly for 5
bank was paying 12% interest compounded quarterly. On May 28, 2013, the bank years.
announced that it would start paying 11.4% interest, compounded monthly. How 20. The maturity value of P7,000 after five years and compounded quarterly for five
much did John have to his credit on May 28, 2017? years. What is the compound interest rate in this investment certificate?
10. (PROBLEM SET 2 ITEM 2) What amount should be invested now in savings account 𝒏 𝑭
Use 𝒓 = 𝒎 ( √ ) to find 𝒓.
𝑷−𝟏
that is earning 9% compounded quarterly to accumulate a total of P21, 000 after 4
½ years? 21. (PROBLEM SET 2 ITEM 3) Maila Monera paid P16,000 for a 24,177.10 face value

11. Bathsheba wants to provide a P200, 000 graduation gift from her daughter having 6 years remaining until maturity. What semi-annually compounded rate of

Magdalene who is now 16 years old. She would like the fund to be available by the return will she earn of her investment?

time her daughter is 20. If she have chosen an investment that pays 10%
compounded quarterly. How large must be deposited?
12. A person can buy a piece of property for P6, 500, 000 cash or P4, 000, 000 down
payment and P4, 200, 000 in 5 years. If the person has money earnings 8%
compounded quarterly, which is a better purchased plan and by how much?
13. How much should be deposited now at 18% compounded monthly in order to
accumulate P18, 470 in 4 years?
14. James has been notified that the combined principal and the interest on an amount
that he borrowed 30 months ago at 14% compounded semiannually, is now P75,
160. How much of this amount is principal?
15. Find the interest earned at the end of 4 years if P36, 700 is invested at 12%
compounded bimonthly.
16. Salome paid P8, 600 on a loan made 2 years ago at 6% compounded bimonthly. Find
the interest generated. Note: Underlined problems will serve as items for Problem Set #2 and should be
submitted online the day after the first discussion of the examples.
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Chapter 2: Simple and General Annuities Formulas in Computing for Simple Annuities

Lesson 2.1: Simple Annuities Variables used in simple annuity:

Definition of terms: 𝑆𝑛 = Future value of an n-payment annuity

Annuity – A series of equal payments at regular intervals. 𝐴𝑛 = Present value of an n-payment annuity

R = Value of each annuity payment

Classifications of Annuity Based on Payment Schedule j = Nominal interest rate

1. Ordinary Annuity – Is an annuity that is paid or received at the end of the time m = number of conversions per year
period. Ex: Salaries, stocks.
t = time period of the loan
2. Annuity Due – An annuity that is paid or received at the beginning of the time
period. Ex: Rentals, Insurances. n = number of payments in the annuity

3. Deferred Annuity – An annuity in which the first payment is delayed or deferred for i = interest rate per compounding period
a period of time. Ex: SSS salary loan, credit card loans.

Ordinary Annuity Formulas:

Classifications of Annuity Based on Interest Period and Payment Interval

1. Simple Annuity – An annuity in which the number of compounding periods per year
(𝟏 + 𝒊)𝒏 − 𝟏 𝟏 − (𝟏 + 𝒊)−𝒏
𝑺𝒏 = 𝑹 [ ] 𝑨𝒏 = 𝑹 [ ]
𝒊 𝒊
coincides with the number of annuity payments per year.
2. General Annuity (Complex Annuity) – An annuity in which the annuity payments
and compounding periods do not coincide.

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Examples: Answer each item accurately. made on March 28, 2014 and the last will be on March 28, 2020, how large should
each deposit should be?
1. Jenima has been contributing P460 at the end of each quarter for the past 18
9. RFS Software needs to accumulate 650,000 in 2 years to meet future needs. What
quarters to a savings plan that earns 9% compounded quarterly. What amount will
regular payment would they need to make the end of each month, at 12% interest
she accumulate if the continues with the plan for another year?
compounded monthly?
2. Zemirah spends P850 per month on cigarettes. If he stops smoking and invest the
10. A housewife buys a dinning set. She pays P15,000 down payment promised to pay
same amount in the plan paying 15% compounded monthly, how much will he have
P950 at the end of three months for 24 months. If interest is charged at 9%
after 4 years?
compounded quarterly, what is the cash equivalent of the dinning set?
3. At the birth of his grandson, Jethro commits to help to pay his college education. He
decided to make deposits of 10,400 at the end of each 3 months into an account for Note: Underlined problems will serve as items for Problem Set #3 and should be
submitted online the day after the first discussion of the examples.
12 years. Find the amount of annuity assuming 10% compounded quarterly.
4. Anna decides to save 2,700 at the end of every 6 months, which is the amount to
be paid into her retirement plan by the company where she works. If she chooses == END OF HANDOUT FOR INTEREST MATHEMATICS ==
an investment fund that guarantees 8% per year compounded semiannually, how
much will she save in 10 years?
5. Determine the present value on July 7 of 6,800 paid at the end of each subsequent
calendar quarter for 7 years if money is worth 6% compounded quarterly.
6. How much must Alden save each month if he would like to accumulate P5,000 in 3
years? Assume that the interest paid at the rate of 6% compounded monthly and
that Alden makes his deposit at the end of every month.
7. Eli have decided to make semiannually payments of 7,800 at the end of every 6
months for 8 years into an investment that he thinks will yield 7% compounded
semiannually. What is the present value of his money?
8. To accumulate 85,250, Joanna needs to place equal deposits at the end of every 3
months in a fund which earns 18% compounded quarterly. If the first deposit will be