Simple Interest

LESSON _ : SIMPLE INTEREST
Interest refers to the amount paid for the use of money. The
individual or entity that lends money is known as the lender and the one
who borrows money is referred to as lender. From the lender’s viewpoint,
interest is money paid or owed for the use of money. The interest which is
computed on a principal just once for the whole term of the loan is called
simple interest. FORMULA
I =Prt
Where:
 I is the interest
 P isthe principal
 r is theinterest rate ;∧¿
 t is time∈ years
Principal – is the sum of money borrowed. The bigger the principal, the
bigger the interest.
Rate – is the percent of the principal that is paid for.
Time – refers to the length of duration from origin date to the maturity date
and expressed in years.
Examples:
1. Calculate the interest earned on lending Php1000 for two years at 3% per
annum in simple interest.
Given:
P=1000r =3 %=0.03t=2
Solution:
I =Prt¿ 1000 ( 0.03 ) ( 2 ) I =Php 60
2. An employee borrowed a sum of Php12,000 from a financing company for

3 years at 15% per annum. What is the total interest he paid in 3 years?
Given:
P=12000r =15 %=0.15t=3
Solution:
I =Prt ¿ 12000 ( 0.15 ) ( 3 ) I =Php 5,400
3. Karen is evaluating certificates of deposit (CDs) from his credit union.

She wants to invest Php1,000. CD “A” pays 1.835% interest rate at the end
of 24 months. CD “B” pays 0.925% interest at the end of 12 months. How
much more interest will she earn with CD “A”? Answer : Php 27.45
4. Rieben invests Php3,400 at 5 % interest for 3 years. How much interest

1
will she be paid at the end of the time period? Answer : Php 535.50
4
5. Michelle took out a loan of Php1,200 with an interest rate of 3% annual

percentage rate. How much interest would she owe after two months?
Answer : Php 6.00
Accumulated Value and Present Value

The sum of the principal plus the interest earned is called the accumulated
value or FORMULA future value. In symbols:
F=P+ I
Where:
 F is the future value

 P isthe principal ;∧¿
 I is the interest
If we replace I by Prt (according to the formula), then we have

F=P+ Prt
By factoring, we have a new formula: F=P(1+rt )
Examples:
1. Calculate the accumulated value earned on lending Php1000 for two

years at 3% per annum in simple interest.
Given:
P=1000r =3 %=0.03t=2
Solution:
F=P(1+rt )¿ 1000(1+(0.03)(2))F=Php 1060

2. An employee borrowed a sum of Php12,000 from a financing company for
3 years at 15% per annum. Find the future value.
Given:
P=12000r =15 %=0.15t=3
Solution:
F=P(1+rt )¿ 12000(1+(0.15)(3))F=Php 17,400
3. Adam decided to deposit Php8,000 in a bank at a simple interest of 3% till

12 years so that he can use it for his expenses later. How much money will
he have in his account after 12 years? Answer : Php 10,880
4. A bank lends Php150,000 at 7.5% in simple interest. After 5 years, how

much money should be paid back to the back? Answer : Php 206,250
5. Find the future value of Php2000 at 2.6% interest rate in 9 months.

Answer : Php 2039
When Principal(P) is unknown:

FORMULA
when interest is given when future valueis given
I F
P= P=
rt 1+rt
Examples:
1. If Miss Bertis paid an interest of Php3,000 for a loan obtained at 9% per

annum for eight months, what is the original loan?
Given:
8 2
I =3000r =9 %=0.09t= =
12 3
Solution:
3000
I¿
P= 2 P=Php 50,000
rt (0.09)( )
3
2. The accumulated value paid on a loan is Php72,000. If the loan was for 3
years at 9% simple interest, how much was the original loan?
Given:
F=72000r =9 %=0.09t=3
Solution:
F ¿ 72000
P= P=Php 56,692.91
1+rt 1+ ( 0.09 ) (3)
3. Find the principal if the total interest is Php19,500 in 4 years at 9.75%

interest rate.
Answer : Php 50,000
4. Determine the present value of an investment which accumulated to

Php66,666 in 6 years of 6% simple interest. Answer : Php 49,019.12
5. Php400 interest is earned at an interest rate of 5% in 4 years. How much

is the principal?
Answer : Php 2000
When Rate(r) is unknown:
FORMULA
I F−P
r= r=
Pt Pt
Examples:
1. Xiao Li pays Php1000 in interest per year for 8 years borrowing

Php12,000 in simple interest. What is the interest rate?
Given:
I =1000P=12000t=8
Solution:
I 1000 1
r= ¿ r = =1.04 %
Pt (12000)(8) 96
2. A sum of Php25,000 will become Php31,000 in 48 months. What is the

interest rate per annum.
Given:
F=31000P=25000t=48 months=4 years
Solution:
F−P 31000−25000 3
r= ¿ r = =0.06=6 %
Pt (25000)( 4) 50
3. Lebron borrowed Php200,000 from his company. If he paid an interest of

Php37,500 for one and a half years, find the rate of interest. Answer :12.5 %
4. A company lends Michelle Php4000. Every month she will pay Php11.88
interest for 1 year. What is the interest rate? Answer :3.56 %
5. Rieben deposited some amount of money in the bank at simple interest.

After 15 years, the amount became seven times. What is the interest rate?
Answer : 40 %
When Time(t) is unknown:

FORMULA
I F −P
t= t=
Pr Pr
Examples:
1. In how many years will a sum of Php4000 yield a simple interest of

Php1440 at 12% per annum?
Given:
I =1440P=4000r =12%=0.12
Solution:
I 1440
t= ¿ t=3 years
Pr (4000)(0.12)
2. How long must Php45,000 be invested at 8% simple interest rate in order

to have Php46,800?
Given:
F=46800P=45000r =8 %=0.08
Solution:
F −P 46800−45000 1
t= ¿ t= years∨6 months
Pr (45000)( 0.08) 2
3. For how many months must Php95,000 be invested to earn Php1187.50 of

simple interest at an interest rate of 5%. Answer :3 months
4. Find the time required for a sum of money to amount to five times itself
at 16% simple interest per annum. Answer :25 years
5. If you placed Php2000 into an investment account earning 3% simple

interest, how many months does it take for you to have Php2025 in the
account? Answer :5 months
Exact and Ordinary Interest and Time Between Two Dates:

Exact interest – is used when interest is computed on the basis of 365
days a year or 366 days in leap year.
Ordinary interest – is used when interest is computed on the basis of

an assumed 30 days per month or 360 days per year.
Actual time – refers to the exact number of days between two days.
Approximate time - refers to the assumption that each month has 30
days.
Example:
1. On June 26, 2013, Rieben borrowed Php20,000 and agreed to pay on

August 9, 2013 at 5% simple interest. Compute the total value in terms of:
a. Banker’s Rule
b. Exact Simple Interest
Given:
P=20000r =5 %=0.05
Solution:
a.
June 30−26=4 t=¿

July 31 days
August 31−9=22
Total 57 days
57
F=P(1+rt )¿ 20000(1+(0.05)( )) F=Php 20158.33
360
b.
t=
June 30−26=4
July 31 days
August 31−9=22
Total 57 days
(
F=P ( 1+ rt )¿ 20000 1+ ( 0.05 ) ( 365
57
))F=Php 20156.16
2. From the problem no. 1, find:
a. b.
approximate approximate
360 365
Given:
P=20000r =5 %=0.05
Solution:
a.
June 30−26=4 t=¿

July 30
August 30−9=21
Total 55 days
55
F=P(1+rt )¿ 20000(1+(0.05)( )) F=Php 20152.78
360
b.
t=
June 30−26=4
July 30
August 30−9=21
Total 55 days
55
F=P(1+rt )¿ 20000(1+(0.05)( )) F=Php 20150.68
365
3. Joseph borrowed 𝑃ℎ𝑝 5,000 on November 2, 2015 from Arthemus, which
is to be repaid on May 21, 2016 at 6.2% simple interest per year. Find the
amount to be repaid using the following time factors:
a. Banker’s Rule
Answer : a. Php 5163.61b . Php5161.37
4. From the problem no. 3, find:
a. b.
approximate approximate
360 365
Answer : a. Php 5161.03b . Php5158.82
5. An amount of Php2300 was invested at 8% simple interest on May 25,

2017. How much shall be the amount of interest earned on October 12,
2017 using:
a. Banker’s Rule
c.
approximate
360
d.
approximate
365
Answer : a. Php 71.56b . Php70.58c . Php 70.02d . Php 69.06

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LESSON _ : SIMPLE INTEREST

I =Prt¿ 1000 ( 0.03 ) ( 2 ) I =Php 60

2. An employee borrowed a sum of Php12,000 from a financing company for

P=12000r =15 %=0.15t=3

3. Karen is evaluating certificates of deposit (CDs) from his credit union.

4. Rieben invests Php3,400 at 5 % interest for 3 years. How much interest

5. Michelle took out a loan of Php1,200 with an interest rate of 3% annual

Accumulated Value and Present Value

 F is the future value

If we replace I by Prt (according to the formula), then we have

By factoring, we have a new formula: F=P(1+rt )

1. Calculate the accumulated value earned on lending Php1000 for two

F=P(1+rt )¿ 1000(1+(0.03)(2))F=Php 1060

P=12000r =15 %=0.15t=3

F=P(1+rt )¿ 12000(1+(0.15)(3))F=Php 17,400

3. Adam decided to deposit Php8,000 in a bank at a simple interest of 3% till

4. A bank lends Php150,000 at 7.5% in simple interest. After 5 years, how

5. Find the future value of Php2000 at 2.6% interest rate in 9 months.

When Principal(P) is unknown:

1. If Miss Bertis paid an interest of Php3,000 for a loan obtained at 9% per

3. Find the principal if the total interest is Php19,500 in 4 years at 9.75%

4. Determine the present value of an investment which accumulated to

5. Php400 interest is earned at an interest rate of 5% in 4 years. How much

When Rate(r) is unknown:

1. Xiao Li pays Php1000 in interest per year for 8 years borrowing

2. A sum of Php25,000 will become Php31,000 in 48 months. What is the

3. Lebron borrowed Php200,000 from his company. If he paid an interest of

5. Rieben deposited some amount of money in the bank at simple interest.

When Time(t) is unknown:

1. In how many years will a sum of Php4000 yield a simple interest of

2. How long must Php45,000 be invested at 8% simple interest rate in order

3. For how many months must Php95,000 be invested to earn Php1187.50 of

5. If you placed Php2000 into an investment account earning 3% simple

Exact and Ordinary Interest and Time Between Two Dates:

Ordinary interest – is used when interest is computed on the basis of

1. On June 26, 2013, Rieben borrowed Php20,000 and agreed to pay on

June 30−26=4 t=¿

June 30−26=4 t=¿

4. From the problem no. 3, find:

Answer : a. Php 5161.03b . Php5158.82

5. An amount of Php2300 was invested at 8% simple interest on May 25,

Answer : a. Php 71.56b . Php70.58c . Php 70.02d . Php 69.06

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