LEARNING
OBJECTIVES
After studying this module, you should be able to
compute:
– The future value of an investment
made today
– The present value of cash to be
received at some future date
– The return on an investment
– The number of periods that equates
a present value and a future value
given an interest rate
• Be able to solve time value of money
problems using:
– Formulas
TOPIC
OUTLINE
1. Discount
OVERVIEW
Module 1 serves as a brief discussion about the
basic concepts of thermodynamics and heat
transfer. It gives us an overview on the forms of
energy and the laws governing it. This module is
good for 2 hour lecture.
ACTIVATING
PRIOR KNOWLEDGE
DISCOUNT
Discount – is the difference between the future worth of a
certain commodity and its present worth.
2 Types of Discount:
Trade Discount – discount offered by the seller to induce
trading.
Cash Discount – is the reduction on the selling price offered
to a buyer to induce him to pay promptly.
D=F−P
Where:
D = amount of discount
F = accumulated amount or future worth
P = principal or present worth
Discount Rate – is the discount on one unit of principal per
unit of time.
F−P
d= =1− (1+i )−1
F
If the commodity is discounted in a certain period of time:
Fd=F−P
P=F ( 1−d ) For 1 year
P=F ( 1−nd ) For n years
The relationship between discount rate and interest rate
becomes:
d
i=
1−d
and
i
d=
1+i
Where:
d = discount rate for the period involved
i = rate of interest for the same period
SAMPLE PROBLEMS
Example 1: Mr. T borrowed money from the bank. He
receives from the bank P 1,340 and promised to pay P 1,500
at the end of 9 months. Compute: (a) Simple interest rate;
and (b) Discount Rate.
Ans. (a) 15.92%; (b) 13.73%
Example 2: Find the discount if P 2,000 is discounted for 6
months at 8% simple discount.
Ans. P 80
Example 3: Discount 1650 for 4 months at 6% simple
interest. What is the discount?
Module 1 – Basics of Heat Transfer | Page 1 of 2
Ans. P 32.35 Prepared by:

ENGR. MARK RENBEL V. PARAN

Faculty, College of Engineering and Architecture
SUMMARY
Let us see if you can remember the main points
raised in this lesson. Below is a summary of these
points:

Discount – is the difference between the future worth of a

certain commodity and its present worth.
2 Types of Discount:
Trade Discount – discount offered by the seller to induce
trading.
Cash Discount – is the reduction on the selling price offered
to a buyer to induce him to pay promptly.
D=F−P
Where:
D = amount of discount
F = accumulated amount or future worth
P = principal or present worth
Discount Rate – is the discount on one unit of principal per
unit of time.
F−P
d= =1− (1+i )−1
F
If the commodity is discounted in a certain period of time:
Fd=F−P
P=F ( 1−d ) For 1 year
P=F ( 1−nd ) For n years
The relationship between discount rate and interest rate
becomes:
d
i=
1−d
and
i
d=
1+i
Where:
d = discount rate for the period involved
i = rate of interest for the same period

LEARNING ACTIVITY 1

REFERENCES

Module 1 – Basics of Heat Transfer | Page 2 of 2