Consumer Mathematics

(Essential Mathematics for the Modern

World)

Investing
Objectives:
1. Effectively apply concepts associated with investments
2. Describe Savings, Interest, Investment.
3. Differentiate simple and compound interest.
4. Identify some types of Financial Investments.
Introduction
Consumers purchased goods, and services for
personal use. Consumer consumes commodities,
products, information and data. The process involves
the use of money to enable and fuel consumption.
Consumer mathematics provide us with practical ideas
and tools used in activities like saving money, paying
debts, managing data, and buying products.
Where does
money come
from?

One things for

sure, it doesn’t
grow on trees!
Even though we
wish it did.
How money is pri
nted
CHOOSE YOUR ANSWER
Suppose you had P 5 400 in a savings account and the interest rate was
2% per year. After 5 years, how much do you think you would have in
the account if you left the money to grow?
• More than P 5 616
• Exactly P 5 616
• Less than P 5 616
• Do not know
• Refuse to answer
CHOOSE YOUR ANSWER
Imagine that the interest rate on your savings account was 1% per year
and inflation was 2% per year. After 1 year, how much would you be
able to buy with the money in this account?
• More than today
• Exactly the same
• Less than today
• Do not know
• Refuse to answer
CHOOSE YOUR ANSWER
Tell whether this statement is true or false. “Buying a single company’s
stock usually provides a safer return than a stock mutual fund.”
• True
• False
• Do not know
• Refuse to answer
ANSWERS
FIRST More than P 5 616

SECOND Less than today

THIRD False
What is investing?
Investing is the act of committing money or
capital to an endeavor with the expectation of
obtaining an additional income or profit.

In other words, making money off the

money you already have!
What is savings?

Savings is the money a person has

left over after spending from their 
disposable income over a given time
period.
Savings can be used to increase
income through investing.
Basic Savings Account
• Keeping your money “in the bank”
• Often limits the number of
deposits and withdraws per month
• Need to keep a minimum amount
• Earns interest
• Insured by the government
through PDIC
How do savings account earns?
1. Open savings account in a bank and deposit money.
2. The bank pays you interest for allowing the bank in using
your money.
3. The bank lend the money to borrowers for higher
interest rate.
4. Then the bank set a side lower interest rate from the
depositor.
5. The difference explains how banks stay in business.
Two types of Interest
Simple Interest is a fixed amount earned over a period of time.
I = Prt
I = interest
P= Principal Amount
r = rate of interest per annum
t= time in years
Face Amount (F) is the value of your account after t years.
F=P+I
= P(1 + rt)
Sample Problem on Simple Interest
Trump Banked P 280,000 that gives him
a 0.75% interest. If he leaves the money
in the bank for an entire year, how much
interest would he gained? What if he
withdraw the money in 90 days, how
much would be his interest? What is the
face amount of his account after 5 years?
Sample Problem on Simple Interest
A. How much interest would he gained
after a year?
P = 280, 000 r = 0.75% t = 1 I = ?

I = Prt = (280000)(0.0075)(1) = 2100

He will gain P2,100 in a year.
Sample Problem on Simple Interest
B. What if he withdraw the money in 90
days, how much would be the interest?
P = 280, 000 r = 0.75% t = I = ?

I = (280000)(0.0075)() = 517.81
He only gets P517.81
Sample Problem on Simple Interest
B. What is the face amount of his account after 5
years?
P = 280000 r = 0.75% t = 5
F = P(1 + rt) = 280000(1+{(0.0075)(5)})
= 280000 ( 1 + 0.0375)
= 280000 ( 1.0375)
= 290, 500
The value of his account after 5 years is P290, 500.
Two types of Interest
Compound Interest is an amount earned over a period of time including interest of the
interest of your money.
F=P(1+
F = Face Value
r = rate of interest per annum
t = number of years
m = number of times interest is computed per year or compounding times
daily = 365
Monthly = 12
Quarterly = 4
Semi-Annually = 2
Annually = 1
Sample Problem on Compound Interest
Trump Banked P 280,000 that gives him a
0.75% interest. If he leaves the money for a
year and compounded daily, what is its
account value after a year? If it compounded
quarterly, what is its account value after a
year? Supposedly, Trump leaves the money for
5 years compounding quarterly, How much is
his total earnings?
Sample Problem on Compound Interest
A. If he leaves the money for a year and compounded daily, what
is its account value after a year?
P = 280000 r = 0.75% m= 365 t=1
F=P(1+
=280000(1 +
=280000(1+ 0.000020547
=280000(1.000020547
= 280000(1.007528118)
= 282,107.87
The account value in a year is P282,107.87
Sample Problem on Compound Interest
B. If it compounded quarterly, what is its account value after a
year?
P = 280000 r = 0.75% m= 4 t=1
F=P(1+
=280000(1 +
=280000(1+ 0.001875
=280000(1.001875
= 280000(1.00752112)
= 282,105.91
The account value is P282, 105. 91
Sample Problem on Compound Interest
C. Supposedly, Trump leaves the money for 5 years compounding
quarterly, How much is his total earnings?
P = 280000 r = 0.75% m= 4 t=5
F=P(1+
=280000(1 +
=280000(1+ 0.001875
=280000(1.001875
= 280000(1.038175544)
= 290,689.15
The account value is P290,689.15
Time Deposit Account
Time Deposit or Certificate of deposit is a bank product which is almost the same as
savings account, however, money will be kept by the bank in fix period of time (30 days, 60
days, 90 days, or more) in exchange of higher interest rate compared to savings account. It
is also covered by the PDIC up to 500000.
During maturity period, the depositor may choose to:
1. withdraw both principal and earned interest.
2. take the earnings and re-invest the capital.
3. re-invest both capital and earned interest on the same term.
Depositor should avoid terminating their time deposits prematurely hence, depositor
shoulders Documentary Stamp Tax(DST) which is usually shouldered by the bank if the fix
period is matured.
There are formulas for calculating compound interest on term deposits and interest on
time deposits where interest does not compound.. When the interest does not compound,
either the actual number of days or months in the term of the deposit is considered.
Sample Problem on Time Deposit
Assumed that you opened a P100,000
time deposit account that earns 2% per
annum. You left it with 32 days.
Considering the 20% witholding tax
charge to peso time deposits, What is
your interest income in that account?
Sample Problem on Time Deposit
What is your interest income in that
account?
P=100000 r = 2% t= 32 m = 365
I = Pr
I = 100,000(0.02)(
I = 100,000(0.02) (
I = 140.27
Thus , for 32 days your income interest is just P140.27
Money Market Account
Money Market account is a type of account that pays a higher interest rates but requires higher minimum balance that may limit
withdrawals per month.
Money Markey Account pays interest based on current interest rates in the money market. Typically, interest rate is updated
once weekly. The interest earned in this account is taxable.
Money Market Account maybe opened in the bank or on investment institution.
Calculation of Money Market Account.
1. Calculate the daily interest for the current week.
Get the Annual Percentage Rate ( APR ) for the week from the money market provider then divide it by 365.
Example if APR = 3.285% then daily rate = 3.285%/365 = 0.009%
2. Calculate for the first day of the week.
Multiply Daily rate from the starting balance.
Example If starting balance is P572000, hence daily rate is 0.009%
Interest = 572000 (0.00009) = 51.48
The first day interest is P51.48
3. Add the interest earned to the Money Market Account balance and add any deposit made and deduct withdrawals made in that
day if there’s any. This results ending balance which serves as the starting balance for the next day.
4. Repeat steps 2 and 3 for the remaining 6 days of the week.
5. Obtain the updated interest rate for calculating the interest of your money market account for the upcoming week and repeat
steps 1 to 4.
Sample Problem on Money Market Account
Assumed that you opened a P200,000 time
Money Market account. The APR for that week
is 4.5%. What is your ending balance on the
first day? For instance you added P2000 in the
second day, what would be your ending
balance in that day? Supposedly you withdraw
P1000 in the third day, what would be your
starting balance in the fourth day?
Sample Problem on Money Market Account
1. What is your ending balance on the first
day?
2. For instance you added P2000 in the second
day, what would be your ending balance in
that day?
3. Supposedly you withdraw P1000 in the third
day, what would be your starting balance in
the fourth day?
Sample Problem on Money Market Account
1. What is your ending balance on the first
day?
Updated APR = 4.5% Starting Bal = 200000
Daily Interest rate = 4.5%/365 = 0.013%
First day Interest = 200000(0.00013)=26
First Day ending balance
= 200000+26 = P200,026
Sample Problem on Money Market Account
2. For instance you added P2000 in the second day, what
would be your ending balance in that day?
Ending Bal = 200,026
Daily interest rate = 0.013%
Second Day interest
= 200026(0.00013) = 26.0034
Second day ending balance
= 200026 + 26.0034 + 2000
= 202,052. 0034
Sample Problem on Money Market Account
3. Supposedly you withdraw P1000 in the third day, what
would be your starting balance in the fourth day?
Second day ending bal= 202, 052.0034
Daily Interest rate = 0.013%
Third day interest
= 202, 052.0034(0.00013) = 26.27
3rd day Ending balance = 4th day starting balance
= 202, 052.0034 + 26.27 – 1000
= 201,078.27
Evaluation
Basic Savings Account
1. Find the interest earned after 3 years if P12,000 is deposited in a savings
account which earns 5% simple interest.
2. At what simple interest rate is P16,500 invested if it earns an interest of
P1620 just after 1.5 years?
3. What is the maturity value of a P75,000 in a three year investment earning
5% interest compounded monthly?
4. Find the compound amount after 5 years and 9 months if the principal is
P150,000 and the interest rate is 7% compounded annually
Evaluation
Time Deposit
1. How much actual interest is earned (net of 20% tax) after 35 days if P100,000 is placed in a time deposit
earning 2.5% per annum?
2. If the initial deposit is P1.8 M and the rate is 1.625% per annum, find the interest earned(net of 20% tax)
after 91 days. The bank uses 1 year = 360 days.
3. Joey has P500,000 and is looking around for a bank where he can leave his money for six months so it can
earn interest via time deposit . Help him complete the table so he can decide which bank to choose.
Bank Interest Rate Divisor Interest for Interest after
181 days taxes
BPI Direct 2.25% /365
Korean Bank 2% /365
DBO 1.625% /360
Cosmobank 1.25% /360
SPBank 0.5% /360
Evaluation
Money Market
You wanted to tract the record of your P250,000 money market account. The
first week APR is 3.75% . The second week APR is 3.25%. What is the total ending
balance of your account in the 14th day?