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Simple Interest

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17 views35 pages

Simple Interest

Uploaded by

Jc Ramos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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MATH OF INVESTMENT

Simple Interest
Compound Interest
Simple Annuity
General Annuity
Stocks and Bonds
Simple
Interest
- Is charged only to the loan
amount called the
principal.
Simple
Interest
Formulas under simple interest
Maturity Value
Banker’s Interest
Exact Interest
P = Interest
rt
r = Interest
I= Prt Pt
I = Interest t= Interest
P= Principal Pr
r = rate of interest
t = time or term in years or fraction of a year
NOTE:
For TIME, we will use the
following:
a. Annually =1
b. Semi-annually =2
c. Quarterly =4
d. Monthly = 12
e. Weekly = 52
Angelo invested
P100,000.00 to an account
that pays a simple interest of
3% annually. Find the
interest after 2 years.
Given:
P= P100,000.00 t= 2 years
r= 3% or 0.03 I= ?
I= Prt I= Prt
= (P100,000)(0.03)(2)
I = P6,000
Therefore, the interest after 2 years is P6,000.
Felicity invested P25,000.00 at 16%
simple interest for 6 years.
a. How much interest will be
earned?
b. What is the maturity value of the
investment at the end of 6 years?
Given:
P= P25,000.00 t= 6 years
r= 16% or 0.16 I= ?
A. B. I= Prt
I= Prt A= P+I
= (P25,000)(0.16)(6) = P25,000+P24,000
I = P24,000 A = P49,000
Therefore, the interest after Therefore, the maturity value
6 years is P24,000. after 6 years is P49,000.
Engineer Kenneth borrowed
P120,000.00 from his uncle. If
Engineer Kenneth agreed to pay an 8%
annual interest rate, calculate the
amount of interest he must pay if the
loan period is (a) 1 year, (b) 9 months,
(c) 18 months.
Given:
P= P120,000.00 I= ?
r= 8% or 0.08
A. t= 1 yr. I= Prt
I= Prt
= (P120,000)(0.08)(1)
I= P9,600
Therefore, the interest after 1 year is P9,600.
Given:
P= P120,000.00 I= ?
r= 8% or 0.08
B. t=9 mo. I= Prt
I= Prt
= (P120,000)(0.08)(0.75)
I= P7,200
Therefore, the interest after 9 months is P7,200.
Given:
P= P120,000.00 I= ?
r= 8% or 0.08
C. t=18 mo. I= Prt
I= Prt
= (P120,000)(0.08)(1.5)
I= P14,400
Therefore, the interest after 18 months is P14,400.
If P10,000.00 is invested at
4.5% simple interest, how
long will it take to grow to
P11,800.00?
Given:
P= P10,000.00 t= ?
r= 4.5% or 0.045 A= P11,800
I= A-P = P1,800 t=Ii
Pr

Therefore, it will take 4 years for


your money to become P11,800.
To buy the school supplies for the coming
school year, you get a summer job at a
resort. Suppose you save P4,200.00 of
your salary and deposit it into an account
that earns simple interest. After 9
months, the balance is P4,263.00. What is
the annual interest rate?
Given:
P= P4,200.00 t= 9 mo.
r= ? A= P4,263
I= A-P = P63 r=Ii
Pt

Therefore, the interest rate is 2%.


Maturity Value
(Amount or Balance)

A = P(1 + rt)
A = Maturity Value
P = Principal
I = Interest
A loan institution charges 12% simple
interest for a 3-year P60,000.00 loan.

a. Find the total interest on the loan.


b. Find the total amount that must be
paid to the loan institution at the end
of 3 years.
Given:
P= P60,000.00 t= 3 years
r= 12% or 0.12 I= ?
A. B. I= Prt
I= Prt A= P+I
= (P60,000)(0.12)(3) = P60,000+P21,600
I = P21,600 A = P81,600
Therefore, the interest after Therefore, the maturity value
3 years is P21,600. after 3 years is P81,600.
Lawrence invested P20,000.00
at 15% simple interest for 5
years. What is the maturity
value of the investment at the
end of 7 years?
Given:
P= P20,000.00 t= 7 years A = P(1 + rt)
r= 15% or 0.15 A= ?
A= P(1+rt)
= P20,000[1+(0.15)(7)]
= P20,000(1+1.05)
= P20,000(2.05)
Therefore, the maturity value after
A = P41,000 7 years is P41,000.
Find the Maturity Value of the
following loan amounts.

a. P20,000 borrowed at 9% for 2


years.
b. P120,000 borrowed at 10% for 8
months.
Given for A:
P= P20,000.00 t= 2 years A = P(1 + rt)
r= 9% or 0.09 A= ?
A= P(1+rt)
= P20,000[1+(0.09)(2)]
= P20,000(1+0.18)
= P20,000(1.18)
Therefore, the maturity value after
A = P23,600 2 years is P23,600.
Given for B:
P= P120,000.00 t= 8 mo.
r= 10% or 0.1 A= ?

A = P128,000
Therefore, the maturity value
after 8 months is P128,000.
Ordinary or Banker’s Interest – interest
based on a 360–day year.

Exact Interest – interest based on a


365–day year.
You get a 180-day P200,000
loan from a bank at a 10.5%
interest. Calculate the interest
using (a) 360-day and (b) 365-
day year.
Given:
P= P200,000.00 t= 180 days
r= 10.5% or 0.105 I= ?
I= Prt
Given:
P= P200,000.00 t= 180 days
r= 10.5% or 0.105 I= ?
I= Prt
Activity 1
Activity 2
Complete the table by finding the simple interest.
Activity 2
Complete the table by finding the maturity value.

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