Name of Learner: _______________________________________ Section:__________________

LEARNING ACTIVITY SHEETS

Learning Competencies
The learner…
M11GM-IIa-1. illustrates simple and compound interests.
M11GM-IIa-2. distinguishes between simple and compound interests.
M11GM-IIa-b-1. computes interest, maturity value, future value, and present value in simple interest and compound
interest environment.
M11GM-IIb-2. solves problems involving simple and compound interests.

SIMPLE INTEREST
Definition of Terms
Simple Interest (𝑰𝒔) – interest that is computed on the principal. The interest remains constant throughout the term.
Lender or creditor – person (or institution) who invests the money or makes the funds available.
Borrower or debtor – person (or institution) who owes the money or avails of the funds from the lender Origin or loan
date – date on which money is received by the borrower.
Repayment date or maturity date – date on which the money borrowed or loan is to be completely repaid.
Time or term (t) – amount of time in years the money is borrowed or invested; length of time between the origin and
maturity date.
Principal (P) – amount of money borrowed or invested on the origin date.
Rate(r) – annual rate, usually in percent, charged by the lender, or rate of increase of the investment Interest (I) – amount
paid or earned for the use of money.
Maturity value or future value (F) –amount after t years that the lender receives from the borrower on the maturity date.

Example
Problem Solving
A working student in one of the biggest fast-food restaurants in Lucena City wants to save for the upcoming school year.
He wants to deposit his money into a Filipino owned bank so that even in a simple way he can help his fellow Filipino.
Supposed his monthly salary is ₱10,000.00 and it was deposited to an account that earns a simple interest of 2.75% per
annum. Find the simple interest after 6 months, one year, and 18 months.
You can solve this problem using the simple interest formula
𝐼𝑠 = 𝑃𝑟𝑡
where:
𝐼𝑠 = Simple Interest
P = Principal or amount invested or borrowed
r = simple interest rate
t = term of time in years
Here are the steps to find the simple interest:
Step 1: Identify the given and the unknown Step 2: Substitute the given to the formula.
P = ₱10,000.00 𝐼𝑠 = 𝑃𝑟𝑡
r = 2.75% or 0.0275 For 6 months
𝑡1 = 0.5 (6 𝑚𝑜𝑛𝑡ℎ𝑠) 𝐼𝑠 = (₱10,000.00)(0.0275)(0.5) = ₱137.50
𝑡2 = 1 (1 𝑦𝑒𝑎𝑟) For 1 year
𝑡3 = 1.5 (18 𝑚𝑜𝑛𝑡ℎ𝑠) 𝐼𝑠 = (₱10,000.00)(0.0275)(1) = ₱275.00
𝐼𝑠 =? For 18 months
𝐼𝑠 = (₱10,000.00) (0.0275) (1.5) = ₱412.50
The formula can be manipulated to obtain the following relationships:
The formula for the principal amount The formula for rate The formula for time

To find the maturity (future) value, you can use either of the following:

where:
F = maturity (future) value
𝐼𝑠 = simple interest
P = principal or the amount invested or borrowed or present value
r = simple interest rate
t = time or term in years

Example
1. Given: 𝑃 = ₱20,000, 𝐼𝑠 = ₱4,000, 𝑡 = 4 . Find the 2. Given: 𝑃 = ₱40,000, 𝐼𝑠 = ₱700, 𝑟 = 7% . Find 𝑡.
rate (𝑟). 𝐼𝑠 700 1
𝐼𝑠 4000 𝑡= = = 0.25 = 𝑦𝑒𝑎𝑟 𝑜𝑟 3 𝑚𝑜𝑠.
𝑃𝑟 40000(0.07) 4
𝑟= = = 0.05 𝑜𝑟 5%
𝑃𝑡 20000(4)
 3. Given: 𝑃 = ₱15,000, 𝑡 = 4 𝑚𝑜𝑠., 𝑟 = 2%. Find the maturity value 𝐹.
𝐹 = 𝑃 + 𝑃𝑟𝑡
4
𝐹 = 15000 + (15000) ( ) (0.02)
12
𝐹 = 15000 + 100
𝐹 = 15100
Thus, the maturity value is ₱15,100.
COMPOUND INTEREST
Compound interest (𝐼𝑐 ) is the interest computed on the principal and also on the accumulated past interest.
To find the compound interest, which is compounded To find the compound interest use the formula
annually the formula to find the maturity value is:

where:
where: 𝐼𝑐 = compound interest
F = maturity (future) value P = principal or present value
P = principal or present value F = maturity (future) value
r = interest rate
t = term or time in years
To find the present value or principal of the maturity value F due in t years the formulas are:

Example
1. Given: 𝑃 = ₱18,500, 𝑟 = 3% and compounded annually for 3 years, find the maturity value (F) and the
compound interest (𝐼𝑐 ).
𝐹 = 𝑃(1 + 𝑟)𝑡 𝐼𝑐 = 𝐹 − 𝑃
𝐹 = 18500(1 + 0.03)3 𝐼𝑐 = 20215.45 − 18500
𝐹 = ₱20215.45 𝐼𝑐 = 1715.45
2. Given 𝐹 = ₱15,000, 𝑟 = 2% compounded annually for 4 years, find the present value (P).
𝐹
𝑃=
(1 + 𝑟)𝑡
15000
𝑃=
(1 + 0.02)4
𝑃 = ₱13,857.68
Therefore, the present value is ₱13,857.68
Compounding More Than Once a Year
In the examples above the interest are compounded annually, however, there are cases that interest is compounded more
than once a year so in this case additional terms must be clarified such as:
Frequency of conversion (m) - number of conversion period in one year
Conversion or interest period – time between successive conversions of interest
Total number of conversion periods (n)
𝑛 = 𝑚𝑡 = (𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛)(𝑡𝑖𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠)
Nominal rate (𝑖 (𝑚) ) - annual rate of interest or interest rate per year
Rate (j) of interest for each conversion period
𝑖 (𝑚) 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑗= =
𝑚 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛
 Since the rate for each conversion period is represented by Meanwhile, the formula in finding the present value given
j, then in t years, interest is compounded mt times. Thus, the maturity value is:
the formula of Maturity Value for interest compounding 𝑚
times a year is: 𝐹
𝑃=
𝐹 = 𝑃(1 + 𝑗)𝑛 (1 + 𝑗)𝑛
where:
𝐹 = 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒
𝑃 = 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒
𝑖 (𝑚)
𝑗=
𝑚
𝑛 = 𝑚𝑡
Example
1. Find the compound interest and maturity value if 𝑃 = ₱43,000, with a rate of 5% is compounded semi-annually for
6 years.
𝑚=2 𝐼𝑐 = 𝐹 − 𝑃
𝑛 = 𝑡𝑚 = 6 ∙ 2 = 12 𝐼𝑐 = 57830.22 − 43000
𝑖 (𝑚) 0.05 𝐼𝑐 = ₱14830.22
𝑗= = = 0.025
𝑚 2
𝐹 = 𝑃(1 + 𝑗)𝑛 Hence, the compound interest and maturity value are
𝐹 = 43000(1 + 0.025)12 ₱14830.22 and ₱57830.22 respectively.
𝐹 = ₱57830.22
2. Find the compound interest and present value if 𝐹 = ₱105,000 with a rate of 2.5% is compounded quarterly for 3
years.
𝑚=4 𝐼𝑐 = 𝐹 − 𝑃
𝑛 = 𝑡𝑚 = 3 ∙ 4 = 12 𝐼𝑐 = 105,000 − 97,435.81
𝑖 (𝑚) 0.025 𝐼𝑐 = ₱7,564.19
𝑗= = = 0.00625
𝑚 4
𝐹
𝑃= Hence, the compound interest and present value are
(1 + 𝑗)𝑛 ₱₱7,564.19 and ₱97,435.81 respectively.
105,000
𝑃=
(1 + 0.00625)12
𝑃 = ₱97,435.81
 Name of Learner: _______________________________________ Section:__________________

LEARNING ACTIVITY SHEETS

Exercise (Note: Show your solution.)

Part 2
Solve the ff. problems
1. Marinel received ₱ 1,450,500.00 as her inheritance from her parents. She deposited the said amount in a time
deposit with 1% simple interest rate per annum, how much money will be accumulated after 7 years?

2. Jenny is planning to deposit ₱17,000.00 Quezon Metropolitan Bank is offering 7.5% compounded semi-annually
for 5 years while Quezon Premier Bank is offering 7% compounded monthly for 5 years. Which bank should she
deposit her money? Justify your answer by computing and comparing the maturity value for each bank.