University of Science and Technology of Southern

Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |

Oroquieta| Panaon Claro M Recto Avenue, Lapasan, Cagayan de Oro
City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
Mathematics of Finance
nd
2 Semester, SY 2022-2023

Disclaimer
No reproduction of any part of the module may be used, sold, or distributed for commercial purposes or be
changed or included in any other Colleges and Universities, work, or publication, whether in print or electronic,
including sending, publishing, or incorporating them to another module unless prior permission has been
granted.

Module 1
Simple and Compound Interests

Learning Objectives:

At the end of the module, the students should be able to:

1. define simple and compound interests;

2. compute simple and compound interests, maturity value and present value; and
3. solve problems involving simple and compound interests.

I. SIMPLE INTEREST

A debtor pays the bank an amount which is more than the amount they borrowed. An investor may
withdraw from the bank more than the amount deposited. This additional sum is called INTEREST.

Definition of Terms

1. Lender or creditor – person (or institution) who invests the money or makes the funds available. 2.
Borrower or debtor – person (or institution) who owes the money or avails of the funds from the
lender.
3. Origin or loan date – date on which money is received by the borrower.
4. Repayment date or maturity date – date on which the money borrowed or loaned is to be
completely repaid.
5. Time or term (t) – amount of time in years the money is borrowed or invested; length of time
between the origin and maturity dates.
6. Principal or present value (P) – amount of money borrowed or invested on the origin date. 7. Rate
of interest or simply rate (r) – annual rate, usually in percent, charged by the lender, or rate of
increase of the investment.
8. Interest (I) – amount paid or earned for the use of money.
9. Maturity Value or Future Value (F) – amount after t years that the lender receives from the
borrower on the maturity date; equal to the sum of principal and the interest earned.
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 1
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon Claro M Recto Avenue, Lapasan, Cagayan de Oro
City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
Simple Interest (Is)

For every financial transaction, whether you borrowed or invested a certain amount P, a
corresponding percentage of the principal called interest is being paid. Simple Interest (Is) is the
interest charged on the principal alone for the entire duration or period t of the loan or investment, at
a particular rate r. After the term of the loan or investment, the maturity value or future value F is
computed by getting the sum of the principal and the interest due.

Formulas:

➢ ��s = ������

➢ �� = �� + ��s or �� = �� + ������ or �� = �� (�� + ����)

➢ �� = Isrt or �� = �� – ��s

➢ �� = IsPr

➢ �� = IsPt

***where ��s − simple interest

�� − principal

�� − rate of interest or simply rate

�� − time (in year)

�� − future value (or maturity value)

Note: If the given time is in months, it can be converted to year(s) by using the formula

�� = number of months
12
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 2
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
Example:
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 3
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education

PROBLEMS INVOLVING SIMPLE INTEREST

MODULE 1 ANGLES AND THEIR MEASUREMENTS 4

University of Science and Technology of Southern

Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 5
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
MODULE 1 ANGLES AND THEIR MEASUREMENTS 6

University of Science and Technology of Southern

Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon Claro M Recto Avenue, Lapasan, Cagayan de Oro
City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education

II. COMPOUND INTEREST

Question: “Suppose you won ₱10,000.00 and you plan to invest if for 5 years. A cooperative
group offers 2% simple interest rate per year. A bank offers 2% compounded annually.
Which will you choose and why?”

Definition of Terms

1. Compound amount (F) – also called maturity value, it is an accumulated amount

obtained by adding the principal and the compound interest.
2. Conversion period (m) – the number of times in a year the interest will be compounded.
The following are the common conversion periods in a year:
annually: m = 1
semi-annually: m = 2
quarterly: m = 4
monthly: m = 12
3. Number of conversion periods (n) – the total number of times interest is calculated for
the entire term of the investment or loan.
4. Annual interest rate or nominal rate (r) – the stated rate of interest per year.
5. Periodic rate (i) – the interest rate per conversion period.
6. Present value of F (P) – this is the principal P, that will accumulate to F if there is an
interest at periodic rate i for n conversion periods.

Compound Interest (Ic)

Compound interest (Ic) is usually used by banks in calculating interest for long-term
investments and loans such as savings account and time deposits. In this type of interest, the
interest due at stipulated interval is added to the principal and earns interest thereafter. It
implies that the principal increases over a period of time, resulting to an increase in interest
earned at every compounding period. Thus, compound interest is an interest resulting from
the periodic addition of simple interest to the principal amount or simply the difference
between the compound amount and the original principal.

The problem on the next page is an example of compound interest.

MODULE 1 ANGLES AND THEIR MEASUREMENTS 7

University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
Example:
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 8
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 9
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 10
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
 MODULE 1 ANGLES AND THEIR MEASUREMENTS 11
University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
PROBLEMS INVOLVING COMPOUND INTEREST

MODULE 1 ANGLES AND THEIR MEASUREMENTS 12

University of Science and Technology of Southern
Philippines Alubijid | Cagayan de Oro | Claveria | Jasaan |
Oroquieta| Panaon
Claro M Recto Avenue, Lapasan, Cagayan de Oro City
Tel. Nos (088) 856-1738/856-1739 Telefax (088) 856-4696
College of Science and Technology Education
MODULE 1 ANGLES AND THEIR MEASUREMENTS 13