TEACHING GUIDE IN MATHEMATICS (S.Y.

2020-2021)

Topic /Lesson: Simple and Compound Interest

Content Standard Students shows better understanding of key concepts and terms from simple and compound problems.
Performance Standard Students will be able to illustrate, perform, and compute worded and non-worded problems from simple and
compound interest.
Learning Competencies Students computes how to get simple and compound interest.
Specific Learning Students will be able to compute simple and compound interest, will also be able to manipulate variables such as
Outcomes principal, interest, rate, time, compounded interest, compounded/accumulated value.
Time Allotment 120 minutes
Materials Chalk/whiteboard pen, rolled papers in a box (for game)
Resources https://www.onlinemath4all.com/simple-interest-and-compound-interest.html
https://www.investopedia.com/terms/s/simple_interest.asp
PROCEDURE:

I. Introduction

A. Discussion
Ask students (a) real-life scenario question(s) that will make them wonder and will pique their interest in the lesson, such as “Why do you
think when you’re in elementary some people who will come and encourage you to open a bank account?”, “Does that make sense to encourage
you to open bank accounts given that you’re still in elementary?”, “If you had opened a bank account then, how much do you have right now in
that account?”.
Possible answers: To encourage them to be thrifty and be mindful of their money, to let them save money little by little, will have a bigger
amount of money as years pass by.

B. Game/Icebreaker (optional)
Group the students into 4-5 groups and give each group a starting money of 5000Php. Prepare some papers, write a real-life situation
where they will be able to increase/decrease their money, such as paying 300Php for water, 800Php for rice, etc. Put it in a box and let them pick
a random paper. The goal of this game is to let them realize how quickly money is being spent and to let them realize how they should save their
hard-earned money.

II. Motivation
Sharing about the experience in the game and their realizations whether why they can win or why they have gone penniless. Explain that
banks borrow the money that you offer and will pay interest to you as time passes by. The importance of saving will be discussed shortly and how
will they know whether they are in a good bank or not. Will also talk about some personalities who became rich because they handled their money
well.
III. Instruction/Delivery
Interest is defined as the cost of borrowing money as in the case of interest charged on a loan balance. Conversely,
interest can also be the rate paid money on deposit as in the case of deposit. Interest can be calculated in two ways, simple
interest, or compound interest.
Simple interest is a quick and easy method of calculating the interest charge on a loan. Simple interest is determined
by multiplying the daily interest rate by the principal by the number of days that elapse between payments.

Simple Interest
The formulas given below will be useful to solve problems on simple interest.

I = Prt

A=I+P
A -----> Accumulated value (final value)

P -----> Principal (initial value of an investment)

r -----> Annual interest rate (in decimal)

I -----> Amount of interest

t -----> Time (in years)

Example 1

A person deposits P5,000 in a bank account which pays 6% simple interest per year. Find the value of his deposit after 4 years.

Solution:

Formula for simple interest is

I = Prt

Here, P = 5000, t = 4, r = 6%

Let us plug these values in the above formula

I = 5000 ⋅ 6/100 ⋅ 4

I = 1200

The formula to find the accumulated value is

= Principal + Interest

= 5000 + 1200

= 6200

Hence, the value of his deposit after 4 years is P6,200.

Compound interest is the interest that accrues when earning for each specified period added to the principal thus increasing
the principal base on which subsequent interest is computed.

Explains the difference of simple and compound interest.

The formulas given below will be useful to solve problems on compound interest.

A = P(1 +i)nt i= rate/time

C.I = A - P

A -----> Accumulated value (final value)

P -----> Principal (initial value of an investment)

r -----> Annual interest rate (in decimal)

n -----> Number of times interest compounded per year

t -----> Time (in years)

i -----> Quotient of rate over time (Rate/Time)

C.I -----> Compound(ed) Interest

How to find the value of 'i’:

 To find the value of "i", first convert the rate of interest into decimal form. Then divide the decimal value by the number of
conversion periods per year.

For example, in an investment rate of interest is 15% and compounded quarterly. First, we write 15% as decimal form.
That is 0.15. Now we must divide this value by 4 (because compounded quarterly).

Finally, i = 0.15/4 = 0.0375

How to find the value of 'n’:

n = (no. of years) x (no. of conversion periods per year)

For example, in an investment no. of years = 2 and compounded quarterly. The value of n = 2x4 = 8.

Example 1:

P800 is invested in C.I where the rate of interest is 20% per year. If interest is compounded semi-annually, what will be
the accumulated value and C.I after 2 years?

Solution:

The formula to find accumulated value in C.I is

A = P (1 + i) ⁿ
Here,

P = 800

i = 20% /2 = 0.2/2 = 0.1

n=2x2=4

Then, the accumulated value is

A = 800(1 + 0.1) ⁴

A = 800(1.1) ⁴

A = 800 x 1.4641

A = P1171.28

C.I = A - P

C.I = 1171.28 - 800

C.I = P371.28

Example 2
Jonas has a savings account that earns 3 percent interest compounded annually. If his initial deposit is P1000, find the value of
the deposit after 10 years.

Solution:

Formula for final value in compound interest:

A = P (1 + r/n)nt
Because it is compounded annually, number of times interest compounded per year is 1. So, n = 1.

Substitute 1000 for P, 0.03 for r, 1 for n and 10 for t.

A = 1000(1 + 0.03/1)1 ⋅ 10

Simplify.

A = 1000(1.03)10

Use calculator.
A ≈ 1344

So, the value of the deposit after 10 years is about P1,344.

IV. Practice/ Activities

Exercises
1. Kyle bought a P2000 government bond that yields 6% in simple interest each year. Write the equation that gives the total
amount A, in pesos, Kyle will receive when he sells the bond after t years.

Solution :
Formula for simple interest is
I = Ptr
Substitute.
I = 2000 ⋅ t ⋅ 0.06
I = 120t
Final value of the investment :
A = P+I
Substitute 2000 for P and 120t for I.
A = P2120

2. An investor decides to offer a business owner a P20,000 loan at simple interest of 5% per year. Find the total amount in
pesos, the investor will receive when the loan is repaid after 5 years.

Solution :
Formula for simple interest is
I = Ptr
Substitute.
I = 20000 ⋅ 5 ⋅ 0.05
I = 5000
Final value of the investment :
A = P+I
A = 20000 + 5000
A = 25000
So, the investor will receive P25,000 when the loan is repaid after 5 years.

3. Jay puts an initial deposit of P400 into a bank account that earns 5 percent interest each year, compounded semiannually.
Find the value of the deposit after 4 years.

Solution :
Formula for final value in compound interest :
A = P(1 + r/n)nt
Because it is compounded semiannually, number of times interest compounded per year is 2. So, n = 2.
Substitute 400 for P, 0.05 for r, 2 for n and 4 for t.
A = 400(1 + 0.05/2)2 ⋅ 4
Simplify.
A = 400(1 + 0.025)8
A = 400(1.025)8
Use calculator.
A ≈ 487.4
So, the value of the deposit after 4 years is about P487.40

4. Kristen opens a bank account that earns 4% interest each year, compounded once every two years. If she had opened the
account with k pesos, write the expression that represents the total amount in the account after t years.
Solution :
Formula for final value in compound interest :
A = P(1 + r/n)nt
Because it is compounded once in two years, we have
n = 1/2 or 0.5
Substitute k for p, 0.04 for r and 0.5 for n.
A = k(1 + 0.04/0.5)(0.5) ⋅ t
Use calculator and simplify.
A = k(1 + 0.08)(1/2) ⋅ t
A = k(1.08)t/2
V. Assessment
A. Question and Answer
Ask students if the lesson is clear to them, if not, let them ask so you can clear it to them,

B. Assignment
1. Daniel has P1000 in as checking account and P3000 in a savings account. The checking account earns him 1 percent
interest compounded annually. The savings account earns him 6 percent interest compounded annually. Assuming he leaves
both these accounts alone, write the expression that represents how much more interest Daniel will have earned from the
savings account than from the checking account after 5 years.

Solution :

Interest earned in checking account :

C.I = A - P

C.I = P(1 + r/n)^nt - P

C.I = P[(1 + r/n)^nt - 1]

Substitute.

C.I = 1000[(1 + 0.01/1)^1 ⋅ 5 - 1]

C.I = 1000[(1.01)^5 - 1]

C.I = 1000(1.01)^5 - 1000

Interest earned in savings account :

C.I = A - P

C.I = P(1 + r/n)^nt - P

C.I = P[(1 + r/n)^nt - 1]

Substitute.

C.I = 3000[(1 + 0.06/1)1 ⋅ 5 - 1]

C.I = 3000[(1.06)5 - 1]

C.I = 3000(1.06)5 - 3000

The interest earned more in savings account than checking account :

= Interest in savings A/c - Interest in checking A/c

= [3000(1.06)5 - 3000] - [1000(1.01)5 - 1000]

= 3000(1.06)5 - 3000 - 1000(1.01)5 + 1000

= 3000(1.06)5 - 1000(1.01)5 – 2000

2. A person invested P25,200 in two accounts, which pay 5 % and 10% interest annually. The amount invested at 10% rate is
110% of the amount invested at 5% rate. After three years year, he earns P2,442 in interest. How much did he invest at the 5%
rate ?

Solution :

Let "x" be the amount invested at 5% rate.

Then, the amount invested in 10% account is

= 110% of x

= 1.10 ⋅ x

= 1.1x

Given : After three years, total interest earned in both the accounts is P5,760.
So, we have

Interest at 5% rate + Interest at 10% rate = 5760

x ⋅ 5/100 ⋅ 3 + 1.1x ⋅ 10/100 ⋅ 3 = 5760

x ⋅ 0.05 ⋅ 3 + 1.1x ⋅ 0.1 ⋅ 3 = 5760

0.15x + 0.33x = 5760

0.48x = 5760

Divide both sides by 0.48

x = 5760 / 0.48

x = 576000 / 48

x = 12000

Hence, the amount invested at 5% rate is P12,000.