1

Chapter 6: SIMPLE AND COMPOUND INTEREST

Lesson 6.1 Simple Interest

Learning Competencies

At the end of the lesson, the learner is able to:

1. defines and understand the important key terms;

2. solves the amount of interests using simple interest formula;

3. solves the principal amount, rate of interest, time or interest given the other
quantities;

4. apply the formula in finding the simple interest.

Words to think about

❖ Interest
❖ Simple Interest
❖ Ordinary Interest
❖ Exact Interest
❖ Principal
❖ Rate of Interest
❖ Time
❖ Approximate Time
❖ Actual Time

Simple Interest
Simple Interest is defined as the interest derived from investment or loan at a
certain rate and time. It is generally related with short term investments or loans.
Simple interest is found on the original principal amount. It is computed by just
multiplying together principal amount, rate, and time.
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The formula for simple interest is given below:

𝐼 = 𝑃𝑟𝑡
𝑊ℎ𝑒𝑟𝑒:
𝐼 = 𝑠𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 (𝑖𝑛 𝑝𝑒𝑠𝑜𝑠)
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡(𝑖𝑛 𝑝𝑒𝑠𝑜𝑠)
𝑟 = 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑓 𝑡𝑖𝑚𝑒, 𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑒𝑖𝑡ℎ𝑒𝑟 𝑎𝑠 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 𝑜𝑟 𝑓𝑟𝑎𝑐𝑡𝑖𝑜𝑛.
𝑡 = 𝑡𝑖𝑚𝑒 (𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠).
𝐼𝑡 𝑖𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑡ℎ𝑒 𝑑𝑎𝑡𝑒 𝑜𝑓 𝑙𝑜𝑎𝑛 𝑜𝑟 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑖𝑠 𝑒𝑓𝑓𝑒𝑐𝑡𝑒𝑑
𝑎𝑛𝑑 𝑡ℎ𝑒 𝑑𝑎𝑡𝑒 𝑜𝑓 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦. If time is given in months divide the given months by
12.
𝐺𝑖𝑣𝑒𝑛 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑀𝑜𝑛𝑡ℎ𝑠
𝑡= .
12
The maturity value or final amount, F, is the sum of money borrower would
need to pay back or the investor would receive after the term.
The formula for the final amount or maturity value is 𝐹 = 𝑃 + 𝐼.
Since,
𝐼 = 𝑃𝑟𝑡
hence,
𝐹 = 𝑃(1 + 𝑟𝑡 )
Example 1: Find the interest of the loan in the amount of PhP10,000 a man borrowed
for one year at the rate of 15%.
Solution:
Given
𝑃 = 𝑃ℎ𝑃10,000
𝑟 = 15% = 0.15
𝑡 = 1 𝑦𝑒𝑎𝑟
Solution
𝐼 = 𝑃𝑟𝑡
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𝐼 = (𝑃ℎ𝑃10,000)(15%)(1 𝑦𝑒𝑎𝑟)
𝐼 = 𝑃ℎ𝑃1,500.00
Suppose the term of the loan is 2.5 years, the interest will be:
𝑃 = 𝑃ℎ𝑃10,000
𝑟 = 15% = 0.15
𝑡 = 2.5 𝑦𝑒𝑎𝑟𝑠
𝐼 = 𝑃𝑟𝑡
𝐼 = (𝑃ℎ𝑃10,000)(15%)(2.5 𝑦𝑒𝑎𝑟𝑠)
𝐼 = 𝑃ℎ𝑃3,750.00

1 1
Example 2: Find the simple interest on PhP15,550 at 10 % for 3 𝑦𝑒𝑎𝑟𝑠.
2 2

Given
𝑃 = 𝑃ℎ𝑃15,550
1
𝑟 = 10 % = 10.5% = 0.105
2
1
𝑡 = 3 𝑦𝑒𝑎𝑟𝑠
2

Solution
𝐼 = 𝑃𝑟𝑡
1 1
𝐼 = (𝑃ℎ𝑃15,550) (10 %) (3 𝑦𝑒𝑎𝑟𝑠)
2 2
𝐼 = 𝑃ℎ𝑃5,714.625
𝐼 = 𝑃ℎ𝑃5,714.63
Note: The smallest denomination in the Philippine currency is one (1) centavo,
always round off the final answer to the nearest centavo.

Example 3: Mr. Ramirez decided to invest PhP20,000 at 15% simple interest for 10
months. Find the simple interest and the final amount Mr. Ramirez would receive
after 10 months.
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Given
𝑃 = PhP20,000
𝑟 = 15% = 0.15
10 5
𝑡 = 10 months = 𝑦𝑒𝑎𝑟 = 𝑦𝑒𝑎𝑟
12 6
Solution
𝐼 = 𝑃𝑟𝑡
10
𝐼 = (PhP20,000)(15%) ( 𝑦𝑒𝑎𝑟)
12
𝐼 = 𝑃ℎ𝑃2,500.00
The final amount or the maturity value is the principal amount plus the computed
interest, thus 𝐹 = 𝑃 + 𝐼
𝐹 = 𝑃PhP20,000 + 𝑃ℎ𝑃2,500
𝐹 = 𝑃ℎ𝑃22,500.00
Since the final amount is being asked in the problem, we have another way of solving
it. Using the given quantities in the given problem, thus, we have
Given
𝑃 = PhP20,000
𝑟 = 15% = 0.15
10 5
𝑡 = 10 months = 𝑦𝑒𝑎𝑟 = 𝑦𝑒𝑎𝑟
12 6
Solution
𝐹 = 𝑃(1 + 𝑟𝑡 )
10
𝐹 = (PhP20,000) [1 + (15%) ( 𝑦𝑒𝑎𝑟)]
12
𝐹 = 𝑃ℎ𝑃22,500.00

1
Example 4: A bank issued a 5-year loan of PhP75,000 at rate of 9 %. Find the final
2

amount that must be repaid at the end of the term of the loan?
 5

Given
𝑃 = 𝑃ℎ𝑃75,000
1
𝑟 = 9 % = 9.5% = 0.095
2
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
Solution
𝐼 = 𝑃𝑟𝑡
1
𝐼 = (𝑃ℎ𝑃75,000) (9 %) (5 𝑦𝑒𝑎𝑟𝑠)
2
𝐼 = 𝑃ℎ𝑃35,625.00
The final amount or the maturity value is the principal amount plus the computed
interest, thus
𝐹 =𝑃+𝐼
𝐹 = 𝑃ℎ𝑃75,000 + 𝑃ℎ𝑃35,625
𝐹 = 𝑃ℎ𝑃110,625.00
Since the final amount is being asked in the problem, we have another way of solving
it. Using the given quantities in the given problem, thus, we have
Given
𝑃 = 𝑃ℎ𝑃75,000
1
𝑟 = 9 % = 9.5% = 0.095
2
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
𝐹 = 𝑃(1 + 𝑟𝑡 )
1
𝐹 = (𝑃ℎ𝑃75,000) [1 + (9 %) (5 𝑦𝑒𝑎𝑟𝑠)]
2
𝐹 = 𝑃ℎ𝑃110,625.00

The Principal Amount (P)

If the principal amount (P) is the required quantity to solve, the formula is
given below:
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𝐼
𝑃=
𝑟𝑡
The principal amount is solved by just dividing the interest (I) by the product
of the rate of interest (r) and the time (t).
Example 5: At the end of 3 years Mrs. Rosario received an interest of PhP50,000 at
7% rate of interest. How much she should invest today?
Given
𝐼 = 𝑃ℎ𝑃50,000
𝑟 = 7% = 0.07
𝑡 = 3 𝑦𝑒𝑎𝑟𝑠
Solution
𝐼
𝑃=
𝑟𝑡
PhP50,000
𝑃=
(7%)(3)
𝑃 = 𝑃ℎ𝑃238,095.2381
𝑃 = 𝑃ℎ𝑃238,095.24

The Interest Rate (r)

If the rate of interest is the required quantity to solve, the formula is given
below:
𝐼
𝑟=
𝑃𝑡
The rate of interest (r) is solved by just dividing the interest (I) by the product
of the principal amount (P) and the time (t).

Example 6: An interest of PhP10,000 was earned by a savings account of PhP30,000

in 4 years. Find the rate of interest
Given
𝐼 = 𝑃ℎ𝑃10,000
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𝑃 = 𝑃ℎ𝑃30,000
𝑡 = 4 𝑦𝑒𝑎𝑟𝑠
Solution
𝐼
𝑟=
𝑃𝑡
PhP10,000
𝑟=
(PhP30,000)(4)
𝑟 = 0.08333̅ …
𝑟 = 8.33%

The Time (t)

If the time of term (time) is the required quantity to solve, the formula is given
below:
𝐼
𝑡=
𝑃𝑟
The time (t) is solved by just dividing the interest (I) by the product of the
principal amount (P) and rate of interest (r).

Example 7: A teacher in a public-school needs PhP15,000 to buy the necessary

teaching aid materials for her teaching tasks. She borrows in a certain bank that
charges 9% rate of interest. She wants to put a limit on the interest to PhP2,500 only.
How long would it take for the teacher to pay her obligation?
Given
𝐼 = 𝑃ℎ𝑃2,500
𝑃 = 𝑃ℎ𝑃15,000
𝑟 = 9% = 0.09
Solution
𝐼
𝑡=
𝑃𝑟
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PhP2,500
𝑡=
(PhP15,000)(9%)
̅̅̅̅̅
𝑡 = 1.851851
𝑡 = 1.85 𝑦𝑒𝑎𝑟𝑠
Note: If the answer for the time is not exact for years, express the decimal part in
terms of the number of months and the number of days. Using the answer in example
5 which is 1.85 years this is equivalent to 1 year and 10.2 months.
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Important facts to remember:

Simple Interest
Simple Interest is defined as the interest derived from investment or loan at a
certain rate and time.
𝐼 = 𝑃𝑟𝑡
𝑊ℎ𝑒𝑟𝑒:
𝐼 = 𝑠𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 (𝑖𝑛 𝑝𝑒𝑠𝑜𝑠)
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡(𝑖𝑛 𝑝𝑒𝑠𝑜𝑠)
𝑟 = 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑓 𝑡𝑖𝑚𝑒, 𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑒𝑖𝑡ℎ𝑒𝑟 𝑎𝑠 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 𝑜𝑟 𝑓𝑟𝑎𝑐𝑡𝑖𝑜𝑛.
𝑡 = 𝑡𝑖𝑚𝑒 (𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠).
𝐼𝑡 𝑖𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑡ℎ𝑒 𝑑𝑎𝑡𝑒 𝑜𝑓 𝑙𝑜𝑎𝑛 𝑜𝑟 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑖𝑠 𝑒𝑓𝑓𝑒𝑐𝑡𝑒𝑑
𝑎𝑛𝑑 𝑡ℎ𝑒 𝑑𝑎𝑡𝑒 𝑜𝑓 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦.
The Principal Amount (P)
If the principal amount (P) is the required quantity to solve, the formula is
given below:
𝐼
𝑃=
𝑟𝑡
The principal amount is solved by just dividing the interest (I) by the product
of the rate of interest (r) and the time (t).

The Interest Rate (r)

If the rate of interest is the required quantity to solve, the formula is given
below:
𝐼
𝑟=
𝑃𝑡
The rate of interest (r) is solved by just dividing the interest (I) by the product
of the principal amount (P) and the time (t).
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The Time (t)

If the time of term (time) is the required quantity to solve, the formula is given
below:
𝐼
𝑡=
𝑃𝑟
The time (t) is solved by just dividing the interest (I) by the product of the
principal amount (P) and rate of interest (r).
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Exercises: Lesson 6.1

Simple Interest
Name: Score:
Strand/Year/Section: Date:
Teacher:
A. complete the table applying the formula for the simple interest.
I P r t
(Simple Interest) (Principal Amount) (Rate of Interest) (Time)
1. 𝑃ℎ𝑃2,500 5% 1 𝑦𝑒𝑎𝑟
2. 𝑃ℎ𝑃12,000 7.5% 2 𝑦𝑒𝑎𝑟𝑠
1
3. 𝑃ℎ𝑃8,500 6 % 3 𝑦𝑒𝑎𝑟𝑠
2
3 1
𝑃ℎ𝑃1,000 4. 3 % 2 𝑦𝑒𝑎𝑟𝑠
4 4
3 3
𝑃ℎ𝑃4,000 5. 5 % 4 𝑦𝑒𝑎𝑟𝑠
5 4
2 1
𝑃ℎ𝑃5,000 6. 8 % 5 𝑦𝑒𝑎𝑟𝑠
3 2
7. 𝑃ℎ𝑃16,000 10% 10 𝑚𝑜𝑛𝑡ℎ𝑠
𝑃ℎ𝑃2,750 8. 8.5% 8 𝑚𝑜𝑛𝑡ℎ𝑠
𝑃ℎ𝑃5,000 𝑃ℎ𝑃20,000 9. 11 𝑚𝑜𝑛𝑡ℎ𝑠
1
𝑃ℎ𝑃550 𝑃ℎ𝑃10,000 5 % 10.
2

B. Solve the following problems.

1. Find the interest earned, if PhP50,000 was invested for 2 years at 15%.
1
2. Mr. De Castro invested PhP100,000 in an investment company that gives 5 %
2

simple interest for 5 years?

3. Find the final amount, if PhP10,000 is deposited in an investment company at 8%
rate of interest for 5 years.
 12

4. How much money is in the bank when a principal amount of PhP150,000 has been
3
deposited for 5 years and 6 months at 4 %?
4

5. Mr. Zaragosa has issued a 5-year loan to his friend in the amount PhP1,500,000 to
finance a business project. The agreement is the loan is to be paid back in full at the
end of 5 years, with simple interest at 8%. Find the final amount that must be paid.
6. At what simple interest rate will an amount of money triple itself in 20 years?
7. Mr. Charles Recto borrowed PhP75,000 to finance her piggery business. She paid
PhP5,000 as interest after 10 months. What is the rate of interest?
8. What principal amount will give PhP1,500 interest at 15% 5 years and 6 months?
9. Mrs. Legazpi has paid back the bank the loan she borrowed with Php2,000 interest
10. months ago. If the bank charges 20% in the loan, how much did Mrs. Legazpi
borrow?
11. At simple interest, how many years would the amount of PhP25,000 accumulates
to PhP100,000 at 10% rate of interest?
12. How long will a principal earn an interest two times itself at 10% simple interest?
13. How long would it take for the money to increase to four times itself at 10% simple
interest?
14. In how many months would a time deposit of PhP100,000 earn PhP50,000 at 12%
simple interest?
15. How long will PhP55,000 amount to PhP75,000at 15% simple interest annually?
 13

Ordinary Simple Interest and Exact Simple Interest

There are instances wherein money is borrowed or invested for only certain
number of days. 360 or 365 is used as the denominator of the given number of days.
360 is used for ordinary simple interest, it is considered that every month has 30 days.
365 is used for exact simple interest, because there are exactly 365 days for one year.
Note: If the problem gives the time in days, unless otherwise specified, ordinary
simple interest is used.
Formula for ordinary simple interest:
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑜 = 𝑃𝑟 ( )
360
Formula for exact simple interest:
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑒 = 𝑃𝑟 ( )
365

Example 1: Solve the ordinary and exact interest on PhP25,750 if it is invested at 15%
for 125 days.
A. Ordinary Simple Interest
Given
𝑃 = PhP25,750
𝑟 = 15% = 0.15
𝑡 = 125 𝑑𝑎𝑦𝑠
Solution
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑜 = 𝑃𝑟 ( )
360
125
𝐼𝑜 = (PhP25,750)(15%) ( )
360
𝐼𝑜 = 𝑃ℎ𝑃1,341.14583̅
𝐼𝑜 = 𝑃ℎ𝑃1,341.16
B. Exact Simple Interest
Given
 14

𝑃 = PhP25,750
𝑟 = 15% = 0.15
𝑡 = 125 𝑑𝑎𝑦𝑠
Solution
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑒 = 𝑃𝑟 ( )
365
125
𝐼𝑒 = (PhP25,750)(15%) ( )
365
𝐼𝑜 = 𝑃ℎ𝑃1,322.7739 …
𝐼𝑜 = 𝑃ℎ𝑃1,322.77

Example 2: Mr. Dela Rosa applied for a house-improvement loan in the amount of
PhP85,000 from a bank at 20% rate of interest. How much must Mr. Dela Rosa pay
the bank after 250 days applying the ordinary simple interest method?
Given
𝑃 = PhP85,000
𝑟 = 20% = 0.20
𝑡 = 250 𝑑𝑎𝑦𝑠
Solution
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑜 = 𝑃𝑟 ( )
360
250
𝐼𝑜 = (PhP85,000)(20%) ( )
360
𝐼𝑜 = 𝑃ℎ𝑃11,805.555̅
𝐼𝑜 = 𝑃ℎ𝑃11,805.56
Mr. Dela Rosa must pay back the bank the borrowed money (principal amount)
plus the interest. Hence, he must pay the final amount, F, thus,
𝐹 =𝑃+𝐼
𝐹 = PhP85,000 + 𝑃ℎ𝑃11,805.56
𝐹 = PhP96,805.56
 15

Since Mr. Dela Rosa, must pay the final amount in the problem, we have another way
of solving it. Using the given quantities in the given problem, thus, we have
Given
𝑃 = PhP85,000
𝑟 = 20% = 0.20
𝑡 = 250 𝑑𝑎𝑦𝑠
Solution
𝐹 = 𝑃(1 + 𝑟𝑡 )
250
𝐹 = (PhP85,000) [1 + (20%) ( )]
360
𝐹 = PhP96,805.555̅
𝐹 = PhP96,805.56

Example 3: Find the maturity value of PhP6,750 at 11% for 100 days using the exact
simple interest method.
Given
𝑃 = PhP6,750
𝑟 = 11% = 0.11
𝑡 = 100 𝑑𝑎𝑦𝑠
Solution
𝐹 = 𝑃(1 + 𝑟𝑡 )
100
𝐹 = (PhP6,750) [1 + (11%) ( )]
365
𝐹 = PhP6,953.42465753425
𝐹 = PhP6,953.42

1
Example 4: Find the interest on PhP10,000 if it is invested at 9 % for 180 days.
2

Given
𝑃 = PhP10,000
 16

1
𝑟 = 9 % = 9.5% = 0.095
2
𝑡 = 180 𝑑𝑎𝑦𝑠
Solution
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑜 = 𝑃𝑟 ( )
360
1 180
𝐼𝑜 = (PhP10,000) (9 %) ( )
2 360
𝐼𝑜 = 𝑃ℎ𝑃475.00

Example 5. Find the time if the ordinary simple interest on PhP25,000 at 2% is

PhP250.
Given
𝐼𝑜 = PhP250
𝑃 = PhP25,000
𝑟 = 2% = 0.02
Solution
𝐼𝑜
𝑡=
𝑃𝑟
PhP250
𝑡=
(PhP25,000)(2%)
1
𝑡 = 0.5 = 𝑦𝑒𝑎𝑟 = 180 𝑑𝑎𝑦𝑠 = 6 𝑚𝑜𝑛𝑡ℎ𝑠
2
Example 6. What rate of interest is needed if PhP8,500 is invested and earned an exact
simple interest of PhP500 after 105 days?
Given
𝐼𝑒 = PhP500
𝑃 = PhP8,500
𝑡 = 105 𝑑𝑎𝑦𝑠
Solution
 17

𝐼𝑒
𝑟=
𝑃𝑡
PhP500
𝑟=
105
(PhP8,500) ( )
365
𝑟 = 0.20448179272
𝑟 = 0.2045 = 20.45%

Important facts to remember:

Ordinary Simple Interest and Exact Simple Interest
Formula for ordinary simple interest:
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑜 = 𝑃𝑟 ( )
360
Formula for exact simple interest:
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑎𝑦𝑠
𝐼𝑒 = 𝑃𝑟 ( )
365
 18

Exercises: Lesson 6.1

Ordinary and Exact Interest
Name: Score:
Strand/Year/Section: Date:
Teacher:

A. Find the ordinary simple interest and the amount.

1. On PhP5,000 at 5% for 200 days. 2. On PhP9,500 at 4.5% for 325 days

1 1
3. On PhP10,000 at 5 % for 105 days. 4. On PhP25,000 at 4 % for 250 days
2 4

5. On PhP8,000 at 6% for 175 days.

B. Find the exact simple interest and the amount.
1. On PhP7,500 at 12% for 155 days. 2. On PhP15,000 at 5.75% for 95 days.
2 3
3. On PhP6,750 at 6 % for 305 days. 4. On PhP35,000 at 3 % for 185 days.
3 4
3
5. On PhP100,00 at 7 % for 125 days.
5
 19

Approximate Time and Exact Time

How is ordinary simple interest and exact simple interest are computed if the
date of the loan and its maturity date are given instead of the specified number of
days of the term of the loan or investment transactions?
Two important dates are involved in every loan or investment transactions.
These are the date of the loan and the date of payment. These two dates will help us
determine the approximate time and the exact time. To determine the approximate
time, it is considered that every month has 30 days, whereas to get the exact time, the
actual number of days between the two given dates are added. The date of maturity
of the loan is included but the date of the loan is not.

Example 1: Find the number of days from March 25, 2003 to July 29, 2003.
A. To find the approximate time there are two methods to use.
Method 1: Determine the number of days from month to month. Each month consists
of 30 days.
Date Number of Days
March 26-30, 2003 5
April 1-30, 2003 30
May 1-30, 2003 30
June 1-30, 2003 30
July 1-29, 2003 29
Total 124
Method 2: Determine the approximate time by subtracting the serial numbers of the
first date from the last date.
Dates Year Month Day
July 29, 2003 2003 7 29
March 25, 2003 2003 3 25
0 4 4
 20

Approximate Time = 4(30) + 4

= 120 + 4
= 124 days
B. To find the exact time there are two methods to use.
Method 1: Determine the actual number of days from month to month.
Date Number of Days
March 26-31, 2003 6
April 1-30, 2003 30
May 1-31, 2003 31
June 1-30, 2003 30
July 1-29, 2003 29
Total 126

Method 2: Using the table for the number of each day of the year given below, subtract
the serial numbers of the two dates.
Dates
July 29, 2003 210th day of the year
March 25, 2003 84th day of the year
Total exact number of days 126 days
21
 22

Example 2: Find the number of days from February 15, 2002 to July 5, 2002.
A. To find the approximate time there are two methods to use.
Method 1: Determine the number of days from month to month. Each month consists
of 30 days.
Date Number of Days
February 16-30, 2002 15
March 1-30, 2002 30
April 1-30, 2002 30
May 1-30, 2002 30
June 1-30, 2002 30
July 1-5, 2002 5
Total 140
Method 2: Determine the approximate time by subtracting the serial numbers of the
first date from the last date.

Dates Year Month Day

July 5, 2002 2002 7 5
February 15, 2002 2002 2 15

Since 15 cannot be subtracted from 5, we must borrow 1 month from 7 months

and convert it to 30 days (1 month = 30 days) and we add 30 to 5.
Dates Year Month Day
July 5, 2002 2002 6 35
February 15, 2002 2002 2 15
0 4 20
Approximate Time = 4(30) + 20
= 120 + 20
= 140 days
 23

B. To find the exact time there are two methods to use.

Method 1: Determine the actual number of days from month to month.
Date Number of Days
February 16-28, 2002 13
March 1-31, 2002 31
April 1-30, 2003 30
May 1-31, 2003 31
June 1-30, 2003 30
July 1-5, 2003 5
Total 140
Method 2: Using the table for the number of each day of the year, subtract the serial
numbers of the two dates.
Dates
July 5, 2002 186th day of the year
February 15, 2002 46th day of the year
Total exact number of days 140 days

Example 3: Find the number of days from April 15, 2005 to October 28, 2006.
A. To find the approximate time there are two methods to use.
Method 1: Determine the approximate number of days from month to month. One (1)
year is equal to 360 days and each month consists of 30 days.
Since one (1) year has lapsed, thus from April 16, 2005 to April 15, 2006 is
equal to 360 days.
 24

Date Number of Days

April 16-30, 2006 15
May 1-30, 2006 30
June 1-30, 2006 30
July 1-30, 2006 30
August 1-30, 2006 30
September 1-30, 2006 30
October 1-28, 2006 28
Total 193
Total approximate number of days = 360 days +193 days
= 553 days
Method 2: Determine the approximate time by subtracting the serial numbers of the
first date from the last date.
Dates Year Month Day
October 28, 2006 2006 10 28
April 15, 2005 2005 4 15
1 6 13
Determine the number of days from month to month. One (1) year is equal to
360 days and each month consists of 30 days.
Total approximate days = 1(360 days) + 6(30 days) + 13 days
= 553 days
B. To find the exact time there are two methods to use.
Method 1: Determine the exact number of days from month to month.
Since one (1) year has lapsed, thus from April 16, 2005 to April 15, 2006 is
equal to 365 days.
 25

Date Number of Days

April 16-30, 2006 15
May 1-31, 2006 31
June 1-30, 2006 30
July 1-31, 2006 31
August 1-31, 2006 31
September 1-30, 2006 30
October 1-28, 2006 28
Total 196
Total exact number of days = 365 days +196 days
= 561days
Method 2: Using the table for the number of each day of the year, subtract the serial
numbers of the two dates.
Since one (1) year has lapsed, thus from April 16, 2005 to April 15, 2006 is
equal to 365 days.
Dates
October 28, 2006 301th day of the year
April 15, 2006 105th day of the year
Total exact number of days 196 days

Total exact number of days = 365 days +196 days

= 561days
 26

Important facts to remember:

Approximate Time and Exact Time
Two important dates are involved in every loan or investment transactions.
These are the date of the loan and the date of payment. These two dates will help us
determine the approximate time and the exact time. To determine the approximate
time, it is considered that every month has 30 days, whereas to get the exact time,
the actual number of days between the two given dates are added. The date of
maturity of the loan is included but the date of the loan is not.
 27

Exercises: Lesson 6.1

Approximate Time and Exact Time
Name: Score:
Strand/Year/Section: Date:
Teacher:
I. Complete the table below.
Date of Loan or Approximate Exact No. of
No. Date of Maturity
Investment No. of Days Days
1 January 5, 2011 May 19, 2011
2 September 20, 2015 December 14, 2016
3 May 20, 2012 September 22, 2012
4 September 7, 2019 February 15, 2020
5 November 28, 2019 March 29, 2020
6 May 15, 2000 October 19, 2002
7 October 21, 2007 April 12, 2008
8 June 20, 2018 August 16, 2019
9 August 25, 2011 March 28, 2012
10 October 16, 2021 March 23, 2022
11 May 12, 2015 December 14, 2016
12 July 10, 2019 January 8, 2020
13 August 20, 2007 February 28, 2008
14 March 20, 2005 November 25, 2005
15 September 21, 2019 April 20, 2020
 28

Using the knowledge of approximate time and exact time, ordinary simple
interest and exact simple interest, we can find now the four types of simple interest.

Types of Simple Interest between two dates

I. Ordinary simple interest for the approximate number of days (𝐼𝑜𝑎 )

II. Ordinary simple interest for the exact number of days (𝐼𝑜𝑒 )

III. Exact simple interest for the approximate number of days (𝐼𝑒𝑎 )

IV. Exact simple interest for the exact number of days (𝐼𝑒𝑒 )

Example 1: At 10%, find the four types of simple interest and the final amounts on
PhP25,500 from June 30, 2015 to August 23, 2016.

A. Approximate number of days

Determine the approximate time by subtracting the serial numbers of the first date
from the last date.
Dates Year Month Day
August 23, 2016 2016 8 23
June 30, 2015 2015 6 30
1 6 13
Since 30 cannot be subtracted from 23, we must borrow 1 month from 8
months and convert it to 30 days (1 month = 30 days) and we add 30 to 23.
Dates Year Month Day
August 23, 2016 2016 7 53
June 30, 2015 2015 6 30
1 1 23
Approximate number of days = 1(360 days) + 1(30 days) + 23 days
= 413 days
 29

B. Exact number of days

Using the table for the number of each day of the year, subtract the serial numbers of
the two dates.
Since one (1) year has lapsed and 2016 is a leap year, thus from July 1, 2015
to June 30, 2016 is equal to 366 days.
Dates
August 23, 2016 235th day of the year
June 30, 2016 181st day of the year
Total exact number of days 54 days
Total exact number of days = 366 days +54 days
= 420 days
I. Ordinary simple interest for the approximate number of days (𝐼𝑜𝑎 )

Formula for the ordinary simple interest for the approximate number of days (𝐼𝑜𝑎 )

𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑜𝑎 = 𝑃𝑟 ( )
360

Given
𝑃 = 𝑃ℎ𝑃25,500
𝑟 = 10% = 0.10
𝑡 = 413 𝑑𝑎𝑦𝑠 (𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠)
Solution
𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠
𝐼𝑜𝑎 = 𝑃𝑟 ( )
360
413
𝐼𝑜𝑎 = (𝑃ℎ𝑃25,500)(10%) ( )
360

𝐼𝑜𝑎 = 𝑃ℎ𝑃2,925.416̅

𝐼𝑜𝑎 = 𝑃ℎ𝑃2,925.42

For the final amount:

 30

𝐹 = 𝑃 + 𝐼𝑜𝑎

𝐹 = 𝑃ℎ𝑃25,500 + 𝑃ℎ𝑃2,925.42

𝐹 = 𝑃ℎ𝑃28,425.42

II. Ordinary simple interest for the exact number of days (𝐼𝑜𝑒 )

Formula for the ordinary simple interest for the exact number of days (𝐼𝑜𝑒 )

𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑜𝑒 = 𝑃𝑟 ( )
360

Given
𝑃 = 𝑃ℎ𝑃25,500
𝑟 = 10% = 0.10
𝑡 = 420 𝑑𝑎𝑦𝑠 (𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠)
Solution
𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠
𝐼𝑜𝑒 = 𝑃𝑟 ( )
360
420
𝐼𝑜𝑒 = (𝑃ℎ𝑃25,500)(10%) ( )
360

𝐼𝑜𝑒 = 𝑃ℎ𝑃2,975.00

For the final amount:

𝐹 = 𝑃 + 𝐼𝑜𝑒

𝐹 = 𝑃ℎ𝑃25,500 + 𝑃ℎ𝑃2975

𝐹 = 𝑃ℎ𝑃28,475.00

III. Exact simple interest for the approximate number of days (𝐼𝑒𝑎 )

Formula for the exact simple interest for the approximate number of days (𝐼𝑒𝑎 )

𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑒𝑎 = 𝑃𝑟 ( )
365
 31

Given
𝑃 = 𝑃ℎ𝑃25,500
𝑟 = 10% = 0.10
𝑡 = 413 𝑑𝑎𝑦𝑠 (𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠)
Solution
𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠
𝐼𝑒𝑎 = 𝑃𝑟 ( )
365
413
𝐼𝑒𝑎 = (𝑃ℎ𝑃25,500)(10%) ( )
365

𝐼𝑒𝑎 = 𝑃ℎ𝑃2,885.34246̅

𝐼𝑒𝑎 = 𝑃ℎ𝑃2,885.34

For the final amount:

𝐹 = 𝑃 + 𝐼𝑒𝑎

𝐹 = 𝑃ℎ𝑃25,500 + 𝑃ℎ𝑃2,885.34

𝐹 = 𝑃ℎ𝑃28,385.34

IV. Exact simple interest for the exact number of days (𝐼𝑒𝑒 )

Formula for the exact simple interest for the approximate number of days (𝐼𝑒𝑒 )

𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑒𝑒 = 𝑃𝑟 ( )
365

Given
𝑃 = 𝑃ℎ𝑃25,500
𝑟 = 10% = 0.10
𝑡 = 420 𝑑𝑎𝑦𝑠 (𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠)
Solution
𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠
𝐼𝑒𝑒 = 𝑃𝑟 ( )
365
 32

420
𝐼𝑒𝑒 = (𝑃ℎ𝑃25,500)(10%) ( )
365

𝐼𝑒𝑒 = 𝑃ℎ𝑃2,935.246575

𝐼𝑒𝑒 = 𝑃ℎ𝑃2,935.25

For the final amount:

𝐹 = 𝑃 + 𝐼𝑒𝑒

𝐹 = 𝑃ℎ𝑃25,500 + 𝑃ℎ𝑃2,935.25

𝐹 = 𝑃ℎ𝑃28,435.25

Among the four types of simple interest, if the time for the computation of
simple interest is given in days, or in days between two dates, it can be seen that
ordinary simple interest for exact number of days (𝐼𝑜𝑒 ) yields the biggest interest.
This type of simple interest is commonly used in business transaction. This is known
as the Banker’s Rule.
 33

Important facts to remember:

Types of Simple Interest between two dates

I. Ordinary simple interest for the approximate number of days (𝐼𝑜𝑎 )

𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑜𝑎 = 𝑃𝑟 ( )
360

II. Ordinary simple interest for the exact number of days (𝐼𝑜𝑒 )

𝐸𝑥𝑎𝑐𝑡 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑜𝑒 = 𝑃𝑟 ( )
360

III. Exact simple interest for the approximate number of days (𝐼𝑒𝑎 )

𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑒𝑎 = 𝑃𝑟 ( )
365

IV. Exact simple interest for the exact number of days (𝐼𝑒𝑒 )

𝐴𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠

𝐼𝑒𝑎 = 𝑃𝑟 ( )
365
 34

Exercises: Lesson 6.1

Ordinary and Exact Interest for Approximate Time and Exact Time
Name: Score:
Strand/Year/Section: Date:
Teacher:

Solve each of the following.

1. Find the ordinary simple interest and exact simple interest and the final amounts
1
on 𝑃ℎ𝑃7,500 at 8 % for 125 days.
4

2. Determine the principal amount invested that will amount to PhP15,000 from June
5, 2005 to December 25, 2005 if the rate of interest is 10.5% and exact simple interest
for exact time is used.
3. Mr. Hontiveros borrowed PhP25,000 from a bank on May 15, 2006 at 6%, on what
day will he pay the debt of PhP26,500?
4. Find the ordinary simple interest rate if PhP4,500 earns PhP500 from February 20,
2007 to September 10, 2007.
5. Find the exact simple interest, using approximate time, on investment PhP30,000
1
from November 15, 2004 to May 19, 2005 at 5 % simple interest.
2

6. Mr. Reyes borrows from Mr. San Juan the amt of PhP150,000 to finance his business
project on October 1, 2018. Mr. Reyes promised to pay the principal and the simple
interest at 8%to discharge the debt on June 27, 2019. What final amount does Mr.
Reyes pay?
3
7. The interest at 11 % on PhP35,000from March 1, 2019 to November 10, 2019 and
4

the amount due.

8. Applying the Banker’s Rule, find the simple interest on PhP45,500 at 9% from
October 25, 2016 to August 12, 2017.
9. Mr. Samson borrowed money from a bank in the amount of PhP15,000 on
September 10, 2012. He paid the loan on June 7, 2013, how much did he pay back?
 35

10. Mr. Florentino invested the amount of PhP75,500 in an investment company with
simple interest at 8% for 250 days on February 25, 2021.
A. What interest was earned by the investment?
B. Find the maturity date of investment.
11. Find the ordinary simple interest on the principal amount of PhP12,000 earning
an interest of PhP1,500 at 15% from April 13, 2007 to February 25, 2008.
12. Find the ordinary simple interest and exact simple interest at 10% on PhP25,000
and the corresponding amounts at the end of 75 days.
13. On September 19, 2018, Mrs. Delos Santos has paid PhP2,000 interest which was
12% of the total amount of money she borrowed on November 18, 2017. Find the
principal amount she borrowed.
14. Find the simple interest and the maturity date of investment on PhP150,000 at
8% for 300 days on March 10, 2020.
15. Using approximate time, find the original amount that will earn PhP1,000
ordinary simple interest at 15% from March 2019 to April 10, 2020.
 36

Lesson 6.2 Compound Interest (I), Final Amount or Maturity Value (F)
and Present Value (P)

Learning Competencies

At the end of the lesson, the learner is able to:

1. compute interest;

2. maturity value;

3. present value in compound interest; and

4. solve problems involving compound interest.

Words to think about

❖ Compound Interest
❖ Compound Amount
❖ Conversion Period

Compound Interest
It is expected in any business endeavor that the investor is hoping for higher
profits from their investment. In the previous lessons, we have learned that simple
interest remains the same during the investment time.
Investors even think of better earnings using compound interest in computing
the profits of investment. Another type of interest used by the investors in gaining
higher profits is called compound interest. Compound interest is the sum of money
by which the original principal (principal amount) has been raised at the end of the
agreement. Compound amount is the total accumulated amount of money at the end
of the term. It is the sum of the original principal (principal amount) and the
compound interest.
 37

Example 1: Find the compound amount and the compound interest at the end of one
year if PhP1,000 is invested at 16% compounded quarterly.
Solution.
The conversion period is every three (3) months. Interest is gained at the rate
of 16% per year during each period, or at the rate of 4% per period on all principal
amount on hand at the beginning of the period.
At the end of 3 months the interest is PhP40.00 New principal is PhP1,040.00
At the end of 6 months the interest is PhP41.60 New principal is PhP1,081.60
At the end of 9 months the interest is PhP43.26 New principal is PhP1,124.86
At the end of 12 months the interest is PhP44.99 New principal is PhP1,169.85
The compound interest earned in 12 months (1 year) is PhP169.85. The
average rate per year at which interest is earned is on the original principal during
the year is
169.85
= 0.16985 = 16.985% = 16.99%
1000

Compound Interest Formula

𝐹 =𝑃+𝐼
so
𝐼 =𝐹−𝑃
but
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
so
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
since
 38

𝐼 =𝐹−𝑃
Hence,
𝑗 𝑚𝑡
𝐼 = 𝑃 (1 + ) − 𝑃
𝑚
or
𝑗 𝑚𝑡
𝐼 = 𝑃 [(1 + ) − 1]
𝑚

where:
𝑃 = 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑟 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡
𝐹 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑟 𝑓𝑖𝑛𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑡𝑜 𝑤ℎ𝑖𝑐ℎ 𝑃 𝑖𝑠 𝑎𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑
𝐼 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑗
𝑖 = 𝑝𝑒𝑟𝑖𝑜𝑑𝑖𝑐 𝑟𝑎𝑡𝑒, 𝑖 =
𝑚

𝑛 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑤ℎ𝑜𝑙𝑒 𝑡𝑒𝑟𝑚 (𝑛 = 𝑚𝑡 )

𝑡 = 𝑡𝑖𝑚𝑒 𝑜𝑟 𝑡𝑒𝑟𝑚 𝑜𝑓 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑤ℎ𝑖𝑐ℎ 𝑖𝑠 𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠
𝑗 = 𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
Nominal interest rate (𝑗) is also defined as a stated interest rate. For
example, a nominal annual interest rate of 12% based on monthly compounding
means a 1% interest rate per month (compounded). 12% is the nominal rate (𝑗),
whereas 1% is the rate per conversion period or periodic rate (𝑖). Hence, the rate
per conversion period or periodic rate is found by just dividing the nominal rate by
𝑗
the number of conversion period per year, thus, (𝑖 = ).
𝑚

To accumulate a principal P for conversion period means to find the compound

amount F resulting at the end of periods if P is invested at the specified interest rate.
Conversion period (interest period) is the time between successive conversions of
interest into principal and it is denoted by m. The conversion periods are:
𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦 𝑚=1
semi-annually 𝑚=2
 39

𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑚=4
𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑚 = 12
Example 1: Accumulate PhP20,000 for 5 years at 8%compounded quarterly and find
the compound interest which is earned. (Use scientific calculator)
Given:
𝑃 = 𝑃ℎ𝑃20,000
𝑟 = 𝑗 = 8%
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
𝑚 = 4 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦)
Solution
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
8% (4)(5)
𝐹 = (𝑃ℎ𝑃20,000) (1 + )
4
𝐹 = 𝑃ℎ𝑃29,718.9477919 …
𝐹 = 𝑃ℎ𝑃29,718.95
𝐼 = 𝑃ℎ𝑃29,718.95 − 𝑃ℎ𝑃20,000
𝐼 = 𝑃ℎ𝑃9,718.95
Or to find the compound interest, we can use the formula
𝑗 𝑚𝑡
𝐼 = 𝑃 [(1 + ) − 1]
𝑚

8% (4)(5)
𝐼 = (𝑃ℎ𝑃20,000) [(1 + ) − 1]
4
𝐼 = 𝑃ℎ𝑃9,718.94791956709
𝐼 = 𝑃ℎ𝑃9,718.95
 40

1
Example 2: Find the amount due and the compound interest at the end of 10 years
4

if PhP10,000 is deposited in a savings account at 7% compounded monthly. (Use

scientific calculator)
Given:
𝑃 = 𝑃ℎ𝑃10,000
𝑟 = 7%
1
𝑡 = 10 𝑦𝑒𝑎𝑟𝑠
4
𝑚 = 12 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦)
Solution
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
1
7% (12)(104)
𝐹 = (𝑃ℎ𝑃10,000) (1 + )
12
𝐹 = 𝑃ℎ𝑃20,450.36002628 …
𝐹 = 𝑃ℎ𝑃20,450.36
𝐼 = 𝑃ℎ𝑃20,450.36 − 𝑃ℎ𝑃0,000
𝐼 = 𝑃ℎ𝑃10,450.36
Or to find the compound interest, we can use the formula
𝑗 𝑚𝑡
𝐼 = 𝑃 [(1 + ) − 1]
𝑚
1
7% (12)(104)
( )
𝐼 = 𝑃ℎ𝑃10,000 [(1 + ) − 1]
12

𝐼 = 𝑃ℎ𝑃10,450.36002628484
𝐼 = 𝑃ℎ𝑃10,450.36
 41

1
Example 3: Accumulate PhP9 ,500 for 4 years and 3 months at 6 % compounded
2

semi-annually. (use scientific calculator)

Given:
𝑃 = 𝑃ℎ𝑃9,500
1
𝑟=𝑗=6 %
2

3
𝑡 = 4 𝑦𝑒𝑎𝑟𝑠 𝑎𝑛𝑑 3 𝑚𝑜𝑛𝑡ℎ𝑠 = 4 𝑦𝑒𝑎𝑟𝑠
12
𝑚 = 2 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦)
Solution
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
3
(2)(4 )
1 12
6 %
𝐹 = (𝑃ℎ𝑃9,500) (1 + 2 )
2

𝐹 = 𝑃ℎ𝑃12,467.779648155 …
𝐹 = 𝑃ℎ𝑃12,467.78
Example 4: Mr. Arevalo deposited six million pesos in a savings bank. The deposit was
2
left to accumulate at 10 % compounded quarterly for the first 5 years and 12%
5

compounded semi-annually for the next 7 years. Compute for the compound amount
at the end of the term.
Figure:

2
Given 𝑗 = 10 % 𝑗 = 12%
5
 42

𝑚=4 𝑚=2
𝑡=5 𝑡=7
Solution
𝐹1 = 𝑃(1 + 𝑖)𝑛 𝐹2 = 𝑃(1 + 𝑖)𝑛
𝑗 𝑗
𝑖= 𝑖=
𝑚 𝑚

𝑛 = 𝑚𝑡 𝑛 = 𝑚𝑡
𝑗 𝑚𝑡 𝑗 𝑚𝑡
𝐹1 = 𝑃 (1 + ) 𝐹2 = 𝑃 (1 + )
𝑚 𝑚

2 (4)(5)
10 %
5 12% (2)(7)
𝐹1 = (𝑃ℎ𝑃6,000,000) (1 + ) 𝐹2 = (𝑃ℎ𝑃10,025,325.13) (1 + )
4 2

𝐹1 = 𝑃ℎ𝑃10,025,325.126117008 𝐹2 = 𝑃ℎ𝑃22,666,297.24414124
𝐹1 = 𝑃ℎ𝑃10,025,325.13 𝐹2 = 𝑃ℎ𝑃22,666,297.24

Present Value
The present value (𝑃) means the present amount of the loan or investment
today at a given rate of interest and it determines the future sum of money at a later
date.
Formula:
Using the formula in finding the final amount (maturity value) in compound
interest 𝐹 = 𝑃(1 + 𝑖)𝑛 , we can find the formula for the present value.
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝐹
𝑃=
(1 + 𝑖 ) 𝑛
or
𝑃 = 𝐹 (1 + 𝑖)−𝑛
but
𝑗
𝑖=
𝑚

𝑛 = 𝑚𝑡
 43

hence,
𝐹
𝑃=
𝑗 𝑚𝑡
(1 + )
𝑚
or
𝑗 −𝑚𝑡
𝑃 = 𝐹 (1 + )
𝑚
Example 5: Find the present value (𝑃) of PhP10,000 due in 7 years at 12%
compounded annually.
Given:
𝐹 = 𝑃ℎ𝑃10,000
𝑗 = 12%
𝑡 = 7 𝑦𝑒𝑎𝑟𝑠
𝑚 = 1 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦)
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
Solution
Using the formula,
𝐹
𝑃=
(1 + 𝑖 ) 𝑛
𝐹
𝑃=
𝑗 𝑚𝑡
(1 + )
𝑚
𝑃ℎ𝑃10,000
𝑃=
12% (1)(7)
(1 + )
1
𝑃 = 𝑃ℎ𝑃4,523.49215336894
𝑃 = 𝑃ℎ𝑃4,523.49
or
Using the formula,
 44

𝑃 = 𝐹 (1 + 𝑖)−𝑛
𝑗 −𝑚𝑡
𝑃 = 𝐹 (1 + )
𝑚
12% −(1)(7)
𝑃 = (𝑃ℎ𝑃10,000) (1 + )
1
𝑃 = 𝑃ℎ𝑃4,523.49215336894
𝑃 = 𝑃ℎ𝑃4,523.49

1
Example 6: If money is invested at 4 % compounded semi-annually, find the present
4

value of PhP7,750 due at the end of 3 years and 4 months. (Using scientific calculator)
Given:
𝐹 = 𝑃ℎ𝑃7,750
1
𝑟=4 %
4

4
𝑡 = 3 years and 4 months = 3 𝑦𝑒𝑎𝑟𝑠
12
𝑚 = 2 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦)
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
Solution
Using the formula,
𝐹
𝑃=
(1 + 𝑖 ) 𝑛
𝐹
𝑃=
𝑗 𝑚𝑡
(1 + )
𝑚
𝑃ℎ𝑃7,750
𝑃= 4
(2)(3 )
1 12
4 %
(1 + 4 )
2
 45

𝑃 = 𝑃ℎ𝑃6,736.29718862392
𝑃 = 𝑃ℎ𝑃6,736.30
or
Using the formula,
𝑃 = 𝐹 (1 + 𝑖)−𝑛
𝑗 −𝑚𝑡
𝑃 = 𝐹 (1 + )
𝑚
4
−(2)(3 )
1 12
4 %
𝑃 = (𝑃ℎ𝑃7,750) (1 + 4 )
2

𝑃 = 𝑃ℎ𝑃6,736.29718862392
𝑃 = 𝑃ℎ𝑃6,736.30

Important facts to remember:

Compound Interest Formula
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
𝑗 𝑚𝑡
𝐼 = 𝑃 (1 + ) −𝑃
𝑚
or
𝑗 𝑚𝑡
𝐼 = 𝑃 [(1 + ) − 1]
𝑚

where:
𝑃 = 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑟 𝑜𝑟𝑖𝑔𝑖𝑎𝑛𝑙 𝑎𝑚𝑜𝑢𝑛𝑡
𝐹 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑟 𝑓𝑖𝑛𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑡𝑜 𝑤ℎ𝑖𝑐ℎ 𝑃 𝑖𝑠 𝑎𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑
 46

𝐼 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑗
𝑖 = 𝑝𝑒𝑟𝑖𝑜𝑑𝑖𝑐 𝑟𝑎𝑡𝑒, 𝑖 =
𝑚

𝑛 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑤ℎ𝑜𝑙𝑒 𝑡𝑒𝑟𝑚 (𝑛 = 𝑚𝑡 )

𝑡 = 𝑡𝑖𝑚𝑒 𝑜𝑟 𝑡𝑒𝑟𝑚 𝑜𝑓 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑤ℎ𝑖𝑐ℎ 𝑖𝑠 𝑒𝑥𝑝𝑟𝑒𝑠𝑠𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠
𝑗 = 𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
The conversion periods are:
𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦 𝑚=1
semi-annually 𝑚=2
𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑚=4
𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑚 = 12

Present Value
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝐹
𝑃=
(1 + 𝑖 ) 𝑛
or
𝑃 = 𝐹 (1 + 𝑖)−𝑛
but
𝑗
𝑖=
𝑚

𝑛 = 𝑚𝑡
hence,
𝐹
𝑃=
𝑗 𝑚𝑡
(1 + )
𝑚
or
𝑗 −𝑚𝑡
𝑃 = 𝐹 (1 + )
𝑚
 47

Exercises: Lesson 6.2

Compound Interest and Final Amount (Maturity Value)
and Present Value
Name: Score:
Strand/Year/Section: Date:
Teacher:
A. Given the indicated time (𝑡 ), the nominal rate (𝑗) and the conversion period (𝑚)
solve for the periodic rate (𝑖) and the number of conversion periods (𝑛).
Note: Use scientific calculator
1. For 6 years at 11% compounded annually
2. For 4 years at 8% compounded semi-annually
3. For 3 years at 15% compounded monthly
4. For 5 years at 10% compounded quarterly
1
5. For 5 years and 2 months at 12 % compounded quarterly
3
1
6. For 8 years and 5 months at 6 % compounded semi-annually
2
3
7. For 30 months at 10 % compounded quarterly
4

8. For 45 months at 15% compounded semi-annually

1
9. For 9 years at 8% compounded annually
2
3 1
10. For 10 years at 6 % compounded quarterly
4 2

B. Find the compound interest and the final amount compounded semi-annually.
1. PhP4,000 for 5 years at 6%
2. PhP15,000 for 5.8 years at 8%
3 2
3. PhP9,500 for 7 years at 5 %
4 3
1
4. PhP6,000 for 7 years and 6 months at 4 %
2
1
5. PhP10,000 for 50 months at 8 %
4

C. Compute the compound interest and final amount compounded quarterly

1. PhP11,000 for 3 years at 8%
 48

2. PhP5,750 for 4.6 years at 10%

2 1
3. PhP12,000 for 8 years at 4 %
5 3
1
4. PhP15,000 for 5 years and 8 months at 3 %
2
1
5. PhP7,500 for 45 months at 10 %
3

D. Solve the following problems.

1. Accumulate and find the compound interest onPhP10,000 for 5 years at 9%
compounded:
A. annually
B. semi-annually
C. quarterly
D. monthly
2. Find the compound interest earned by the end of 15 years if PhP100,000 is invested
at 7.5% compounded semi-annually.
3. Find the amount due and the compound interest at the end of three years if
PhP20,000 is invested at (a) 8% simple interest; (b) 8% compounded annually; (c)
8% compounded semi-annually; (d) 8% compounded quarterly; (e) 8% compounded
monthly.
4. Find the maturity value and interest if PhP15,000 is deposited in trust fund at 3%
compounded monthly for 7 years.
5. Mr. Daniel borrowed PhP35,000 at 9% interest compounded semi-annually. How
much will he have to pay at the end of 7 years?
6. An investor invested PhP100,000 over a 4-period and earned 4% for the first year,
4% semi-annually during the second year, 4% quarterly during the third year, and
4% monthly during the last year. Find the final amount.
7. Mr. Echivaria owes Mr. Rellora PhP86,250 due now. He offers Mr. Rellora to pay the
principal amount plus the accumulated simple interest at the rate of 5% at the end of
three years. Mr. Rellora insists on charging 5% compounded quarterly. How much
 49

more does Mr. Rellora receive at the end of three years as compared to the offer of
Mr. Echivarria?
8. Mr. Canillo invested PhP10,000 at 12% compounded quarterly for 5 years and
another PhP15,000 at 15% compounded semi-annually for the same length term of
the investment. Find for the total amount of the investments.
9. Alfred is ten years old today has been left an inheritance of PhP1,000,000 in a trust
fund. The money will be placed in the fund at interest until Alfred reaches the age of
21.
a) If money is invested at 6% rate of interest compounded annually, what will
be the amount when he reaches 21?
b) If the investment rate drops to 5% compounded annually at the end of five
years, what will be the final amount when Alfred reaches 21?
10. Find the amount at the end of 10 years if PhP100,000 is invested at 8%
compounded quarterly for 5 years and then 6% rate of interest compounded
annually.
11. Find the present value of PhP96,006.34 if money is invested at 5% compounded
semi-annually.
12. What is the present value of PhP35,000 due in 3 years and 6 months if money is
worth 15% compounded monthly?
13. How much must be invested today at 8% rate of interest to amount to PhP150,000
in 5 years compound semi-annually?
14. Find the present value at 12% compounded quarterly of a debt of PhP134,859.32
due in 4 years and 5 months.
15. How much a man must deposit in a time deposit in a bank that gives 2.5%
compounded annually that will amount to PhP297,171.44 after 7 years?
 50

Lesson 6.3 Interest Rate and Time in Compound Interest

Learning Competencies

At the end of the lesson, the learner is able to:

1. solve rate of interest;

2. solve time; and

3. solve problems involving rate of interest and time in compound interest,

using scientific calculator.

Words to think about

❖ Rate of Interest
❖ Time
Finding the Interest Rate
There are some occasions that investors are concerned to know the rate of
interest prior to investing some amount. To make the computation easier, students
are advised to use scientific calculator.
Formula for the rate of interest:
Using the formula for the final amount involving compound interest, we have,
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
𝐹 𝑗 𝑚𝑡
= (1 + )
𝑝 𝑚
1
𝐹 𝑚𝑡 𝑗
( ) =1+
𝑃 𝑚
 51

1
𝑗 𝐹 𝑚𝑡
=( ) −1
𝑚 𝑃
Hence,
1
𝐹 𝑚𝑡
𝑗 = 𝑚 [( ) − 1]
𝑃

Example 1: Find the rate of interest compounded monthly on PhP8,500 amounted to

PhP12,000 at the end of 5 years. (Use scientific calculator)
Given
𝑃 = PhP8,500
𝐹 = PhP12,000
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
𝑚 = 12 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑚𝑜𝑛𝑡ℎ𝑙𝑦)
Solution
1
𝐹 𝑚𝑡
𝑗 = 𝑚 [( ) − 1]
𝑃

1
PhP12,000 (12)(5)
𝑥% = (12) [( ) − 1]
PhP8,500

𝑗 = 6.91666690978%
𝑗 = 6.92%

Example 2: What must be the rate of interest converted quarterly for the sum of
money to double itself in 10 years and 9 months? (Use scientific calculator)
Given
𝑃 = Principal amount
2P = 𝐹𝑖𝑛𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡
 52

9
𝑡 = 10 𝑦𝑒𝑎𝑟𝑠 𝑎𝑛𝑑 9 𝑚𝑜𝑛𝑡ℎ𝑠 = 10 𝑦𝑒𝑎𝑟𝑠
12
𝑚 = 4 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦)
Solution
1
𝐹 𝑚𝑡
𝑗 = 𝑚 [( ) − 1]
𝑃

1
2P (4)(10 9 )
𝑗 = (4) [( ) 12 − 1]
P

1
9
(4)(10 )
𝑗= (4) [(2) 12 − 1]

𝑗 = 6.50013007742%
𝑗 = 6.50%

Example 3: Mr. Cholo Dela Cruz borrowed PhP25,000 from Mr. James Miguel
Tumbagahan and settled to pay PhP1,000 per month until 9 months. At what annual
rate, compounded quarterly, is Mr. Cholo Dela Cruz paying the interest?
𝑃 = PhP25,000
I = 𝑃ℎ𝑃1,000
9
𝑡 = 9 𝑚𝑜𝑛𝑡ℎ𝑠 = 𝑦𝑒𝑎𝑟𝑠
12
𝑚 = 4 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦)
Solution
1
𝐹 𝑚𝑡
𝑗 = 𝑚 [( ) − 1]
𝑃

𝐹 = PhP25,000 + (9)(𝑃ℎ𝑃1,000)
𝐹 = PhP25,000 + 𝑃ℎ𝑃9,000
𝐹 = PhP34,000
 53

1
PhP34,000 (4)( 9 )
𝑗 = (4) [( ) 12 − 1]
PhP25,000

𝑗 = 43.17266054036%

Finding the Time or Term of Investment/Loan

There are situations wherein the investors are very much interested to know
the term of the transaction. They want to know how long their money will take to
accumulate into higher amount. It is very important to determine the length of time
or term of investment to a desired amount.

To solve for time, 𝑡, the formula for the final amount or compound amount is
used. With the aid of scientific calculator, the solution is simplified.

Example 1: How long would it take for PhP5,000 to accumulate to PhP10,000 at 8%

compounded semi-annually?
Given:
𝑃 = 𝑃ℎ𝑃5,000
𝐹 = 𝑃ℎ𝑃10,000
𝑚 = 2 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦)
𝑗 = 8%
Solution
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
8% (2)𝑡
𝑃ℎ𝑃10,000 = (𝑃ℎ𝑃5,000) (1 + )
2
𝑡 = 8.84 𝑦𝑒𝑎𝑟𝑠
 54

Example 2: On January 26, 2003 Mr. Jose Emmanuel Canillo had PhP500,000 on a
trust fund earning 15% compounded quarterly. He is planning to put up a motor
repair shop as soon as the fund contains an amount of PhP750,000. Find the date will
that amount be available?
Given:
𝑃 = 𝑃ℎ𝑃500,000
𝐹 = 𝑃ℎ𝑃750,000
𝑚 = 4 (𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦)
𝑗 = 15%
Solution
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
(4)𝑡
15%
𝑃ℎ𝑃750,000 = (𝑃ℎ𝑃500,000) (1 + )
4
𝑡 = 2.753472892 𝑦𝑒𝑎𝑟𝑠
𝑡 = 2.75 𝑦𝑒𝑎𝑟𝑠
or
𝑡 = 2 𝑦𝑒𝑎𝑟𝑠 𝑎𝑛𝑑 9 𝑚𝑜𝑛𝑡ℎ𝑠
or
𝑡 = 1,004 𝑑𝑎𝑦𝑠
Therefore, Mr. Canillo will start his business on October 26, 2005.
 55

Important facts to remember:

Finding the Interest Rate
There are some occasions that investors are concerned to know the rate of
interest prior to investing some amount. To make the computation easier, students
are advised to use scientific calculator.
Formula for the rate of interest:
Using the formula for the final amount involving compound interest, we have,
𝐹 = 𝑃 (1 + 𝑖 ) 𝑛
𝑗
𝑖=
𝑚
𝑛 = 𝑚𝑡
𝑗 𝑚𝑡
𝐹 = 𝑃 (1 + )
𝑚
𝐹 𝑗 𝑚𝑡
= (1 + )
𝑝 𝑚
1
𝐹 𝑚𝑡 𝑗
( ) =1+
𝑃 𝑚
1
𝑗 𝐹 𝑚𝑡
=( ) −1
𝑚 𝑃
Hence,
1
𝐹 𝑚𝑡
𝑗 = 𝑚 [( ) − 1]
𝑃

Finding the Time or Term of Investment/Loan

There are situations wherein the investors are very much interested to know
the term of the transaction. They want to know how long their money will take to
 56

accumulate into higher amount. It is very important to determine the length of time
or term of investment to a desired amount.

To solve for time, 𝑡, the formula for the final amount or compound amount is
used. With the aid of scientific calculator, the solution is simplified.
 57

Exercises: Lesson 6.2

Interest Rate and Time in Compound Interest
Name: Score:
Strand/Year/Section: Date:
Teacher:
A. Rate of Interest
1. Daniela borrowed PhP75,000 from Shekina and she was advised to pay for her debt
in 20 months with a total interest of PhP10,000. Find the rate of interest compounded
semi-annually she is paying the interest.
2. Find the nominal rate of interest at which PhP10,00 amounts to PhP25,000 in 6
months.
3. At what rate of interest converted quarterly is sum of money tripled in 10 years?
4. At what rate of interest compounded monthly will money become double itself in
10 years.
5. At what nominal rate of interest compounded semi-annually that PhP15,000
amounts to PhP45,000 in 3 years?
6. Find the nominal rate of interest on PhP20,000 compounded quarterly will amount
to PhP50,000 in 5 months?
7. At what nominal rate of monthly will PhP20,000 amount to PhP50,000 in 3 years?
8. A principal amount of PhP15,000 is invested at a certain effective rate of interest
for 6 years. Afterwards, money is permitted to accumulate further for the next 6 years,
as long as the effective rate is tripled. It is expected that the accumulated value at the
end of the term is PhP55,000. What is the original effective rate of interest?
9. The enrolment fee each semester in level 4 private colleges last year amounted to
PhP40,000. This year, it increased to PhP50,000. Find the annual rate of increase in
enrolment fees.
10. What is the biennial rate of increase in enrolment fees in Problem No. 9?
 58

B. Term (Time) in Compound Interest

1. How long will it take for PhP15,000 to amount to PhP45,000 at 10% compounded
monthly?
1
2. When will PhP20,500 earn an interest of PhP5,000 if it is invested at a rate of 10 %
2

compounded semi-annually?
3. In how many years will PhP15,000 become PhP40,000 at 8% effective rate?
4. In how many months will money tripled itself at 5% converted monthly?
5. Mrs. Rellora deposited PhP65,000 in her savings account which is to be used for his
son’s tertiary education when he reaches 18. The bank gives 6.5% interest
compounded monthly. Without withdrawing any amount from this account, the
mother is expecting to have PhP100,000 when her son becomes 18. What was the age
her son when she deposited the money?
6. How long will it take for PhP40,000 to accumulate to PhP55,000 if interest is
computed at the rate of 11% compounded monthly?
7. How long will it take for PhP40,000 to accumulate to PhP55,000 if interest is
computed at the rate of 11% compounded bi-monthly?
8. If the population of a third-class city grows at the rate of 15% compounded
monthly, when will its population increase to 150,000 from today’s population of
55,000? (Express your answer in yeas, months, and days)
9. For how many days will PhP20,000 become PhP40,000 if the rate of interest is 10%
compounded monthly?
10. When can the two debts: PhP40,000 due in two years and PhP25,000 due in 4
years be replaced by a single payment of PhP75,000 if interest is at 5% nominal rate
of interest?