Professional Documents
Culture Documents
Simple and Compound Interest: Learner's Module in General Mathematics
Simple and Compound Interest: Learner's Module in General Mathematics
Simple and Compound Interest: Learner's Module in General Mathematics
FLORENCE D. PALASI
Developer
Department of Education • Cordillera Administrative Region
Published by:
Learning Resources Management
and Development System
COPYRIGHT NOTICE
2020
“No copyright shall subsist in any work of the Government of the Philippines.
However, prior approval of the government agency of office wherein the work is
created shall be necessary for exploitation of such work for profit.”
This material has been developed for the implementation of K-12 Curriculum
through the Curriculum Implementation Division (CID) - Learning Resources
Management and Development System (LRMDS). It can be reproduced for
educational purposes and the source must be acknowledged. Derivatives of the work
including creating an edited version, an enhancement or a supplementary work are
permitted provided all original work is acknowledged and the copyright is attributed.
No work may be derived from this material for commercial purposes and profit.
ii
PREFACE
iii
ACKNOWLEDGMENT
The developer wishes to express her gratitude to those who helped in the
development of this learning material. The fulfillment of this learning material would
not be possible without them.
Thanks to those who gave moral and technical support in the crafting of this
learning module. To her colleagues in school for sharing their knowledge and
expertise as she develops this learning resource. Lastly, to the office of DepEd
Division of Baguio City for giving her the opportunity to discover her skills as a module
writer.
CONSULTANTS
iv
TABLE OF CONTENTS
Page
Copyright Notice ………………………………………………….……...….…….….…ii
Preface …………………………………………………………………...………………iii
Acknowledgement……………………………………………………. …….………..…iv
Table of Contents……………………………………………………….……. …..….…v
Title Page…………………………………………………………………………………1
What I Need to Know ……………………………………………………………..….…2
What I Know………………………………………………………………….…….….…3
What’s In……………………………………………………………………………….…4
What’s New…………………………………………………………………………….…4
What Is It……. ……………………………………….……………….……………….…4
What’s More……. ……………………………………...………………………….….…9
What I Have Learned……………………………………………………………...….…9
What I Can Do…….………………………………………………...……………..….…9
Post-Assessment …………………...………………………………………….…...…10
Additional Activities……………………………………………….………………….…10
Answer Key………………………………………………………………………………11
References…….…………………………………………………...…….…….….….…12
v
Simple and Compound
Interest
Learner's Module in General
Mathematics
Quarter 2 ● Week 1
FLORENCE D. PALASI
Developer
Department of Education • Cordillera Administrative Region
1
What I Need to Know
Welcome to this module on SIMPLE and COMPOUND INTEREST!
This module is intended to help you, learners, understand and master the simple and
compound interest. It is designed to equip you with essential knowledge about the
said topic and skills on finding the maturity value, future value, and present value
including solving problems involving simple interest.
Learning Objectives
At the end of the module, you should be able to:
1. illustrate simple and compound interest;
2. distinguish between simple and compound interest;
3. compute interest, maturity value, future value, and present value in simple interest
environment; and
4. solve problems involving simple interests.
2
What I Know
This part is prepared for you to test your existing knowledge on simple interest. You
are encouraged to answer the items honestly without references of any kind. Write the letter
of your answer on your answer sheet. You may use your calculator.
--------------------------------------------------end of test--------------------------------------------------------
3
Simple and Compound Interest
What’s In
Based from the pre-assessment above, you have now an idea on simple interest.
Before going further, give some ways on how to take care a hard-earned money.
What’s New
Depositing money in a bank is like lending money to the bank, in return the bank pays
interest. By contrast, borrowing money from banks or lending institutions requires payment of
interest. Hence, money has present values and future values.
Take note that there are many people who invest or borrow money around the world.
The man in the picture below is one of the greatest investors in the world whom we can learn
from to become the greatest investor in our own hometown or in the Philippines.
Warren Buffet
- Known as the “Oracle of Omaha”, one of
the most investors of all time.
- He runs Berkshire Hathaway, which owns
more than 60 companies, including insurer Geico,
battery maker Duracell, and Restaurant Chain Dairy
Queen.
-The son of a US congressman, he first
bought stock at age 11 and first filed taxes at age
13.
- As of September 2020, his real time net
worth is $79.4 billion.
What Is It
Aiming to become the greatest investor in the world is possible. To start with that aim,
learning simple and compound interest is not a bad idea. Now, to have a clearer idea on
simple and compound interest, study lessons 1 – 4.
4
4. Repayment date or Maturity date – a date on which the money borrowed or loaned be
completely paid.
5. Time or Term ( t ) – amount of time in years the money is borrowed or invested; length of
time between the origin and maturity dates.
6. Principal ( P ) – amount of money borrowed or invested on the origin date.
7. Rate ( r ) – annual rate, usually in percent, charged by the lender, or rate of increase of the
investment.
8. Interest ( I ) – amount paid or earned for the use of money.
9. Simple Interest ( I s ) – interest computed on the principal only and then added to it.
10. Compound Interest ( I c ) – interest is computed on the principal and also on the
accumulated past interests.
11. Maturity value or Future value ( F ) – amount after t years; that the lender receives from
the borrower on the maturity date.
Solution:
Investment 1. Palasi Bank (Simple Interest, with annual rate r )
5
So, if I were Jeff, I will choose the offer of the Dangew Bank.
To generalize the procedures in finding simple and compound interests using
formulas, proceed to lesson 3 and lesson 4.
For the maturity value or future value, the formula is F = P + I s . This formula is being
used if the given are principal and interest. However, there are cases wherein the given are
principal, rate, and time. For that specific case, let us derive the formula by substituting the
formula of interest to I s . So,
F = P + Is
F = P + P rt = P(1 + rt )
Examples:
1. From the example in lesson 2, let us identify the given then solve for the simple interest.
2
Given: P = 10,000.00 r= = 0.02 t =5
100
Unknown: Interest ( I s )
Solution: I s = P r t Formula
I s = (10,000.00)(.02)(5) Substitute the given
I s = 1000 .00 Multiply
2. A bank offers 0.50% interest rate for a particular deposit. How much interest will be earned
if 2 million pesos is deposited in this savings account for 5 months?
6
0.50 5
Given: P = 2,000,000.00 r= = 0.005 t= (5 months divided by 12 months)
100 12
Unknown: Interest ( I s )
5
Solution: I s = (2,000,000.00)(.005)( ) = 4,166.67
12
The interest earned for 5 months is ₱4,166.67
3. When invested at an annual interest rate of 6%, an amount of ₱10,500.00 of simple interest
is earned in 15 days. How much money was originally invested?
6 15
Given: I s = 10,500 .00 r= = 0.06 t= (days divided by 365, for exact date)
100 365
Unknown: Principal ( P )
Is
Solution: P =
rt
10,500
P= = 4,258,333 .33
15
0.06
365
The principal or the money originally invested was ₱4,258,333.33
4. Your father applies for a loan amounting to P600,000.00 in a cooperative because he wants
to buy a lot in Tublay, Benguet. The simple interest is ₱168,500.00 for 4 years. What interest
rate is being charged?
Given: P = 600,000.00 I s = 168,500 .00 t=4
Unknown: Rate ( r )
Is
Solution: r =
Pt
168,500.00
r= = 0.0702 Substitute the given then simplify.
600,000.00(4)
r = 0.0702 (100%) = 7.02% Multiply 100% (Rate is in percent)
Thus, the cooperative charged an annual simple interest rate of 7.02%.
5. How long will the principal earn an interest equal to half of it at 8% simple interest?
1
Given: P = x Is = x = 0.5x t = 0.08
2
Unknown: Time ( t )
Is 0.5 x
Solution: t = = = 6.25 Simplify
P r x(0.08)
It will take 6.25 years or 6 years and 3 months for a principal to earn half of its
value at 8% simple annual interest rate.
6. Find the maturity value if ₱500,000.00 is deposited in a bank at an annual interest rate of
1% after 3 years.
Given: P = 500,000.00 r = 0.01 t =3
7
Is = P r t
I s = (500,000.00)(0.01)(3) = 15,000.00
F = P(1 + r ) t Ic = F − P
Start with the formula of future value. From this, derive the formula of the present value
or the principal.
F = P(1 + r ) t
F P(1 + r ) t
=
(1 + r ) t (1 + r ) t
F
P= or P = F (1 + r ) −t
(1 + r ) t
Examples:
1. Using the example in lesson 2, let us compute for the compound interest offered by the
East West Bank to Jeff.
2
Given: P = 10,000.00 r=
= 0.02 t =5
100
Unknown: Interest ( I c ) and future value ( F )
Solution: Compute first the future value.
F = P(1 + r ) t
F = 10,000.00(1 + 0.02)5 = 11,040.81
Like what was illustrated in lesson 2, the future value is ₱11,040.81. Now, compute
the compound interest.
I c = F − P = 11,040.81 − 10,000.00 = 1,040.81
Thus, the compound interest is ₱1,040.81.
8
8 2
Given: F = 500,000.00 r = 0.05 t= or
12 3
Unknown: Present value ( P )
2
−
Solution: P = F (1 + r ) −t = 500,000.00(1 + 0.05) 3
= 483,998.27
What’s More
Based on your understanding on the lessons under “What Is It”, answer the Activity
and the Assessment. You are allowed to use your calculator.
Activity: Identify the given then solve for the unknown. Show your solutions on your answer
sheet.
1. What are the amounts of interest and maturity value of a loan for ₱250,000.00 at 5.5%
simple interest for 4 months?
2. At what simple interest rate per annum will ₱40,000.00 accumulate to ₱55,000.00 in 3
years?
Assessment: Identify the given then find for the unknown. Show your solutions on your
answer sheet.
1. How long will ₱75,000.00 amount to ₱90,500.00 if the simple interest rate is at 10% per
annum?
2. In order to have ₱450,000.00 in 4 years, how much should you invest if the simple interest
rate is 3.5%?
1
3. If a person borrowed ₱108,900.00 at an annual simple interest rate of 5 % for 20 months,
4
how much interest should he pay?
What I Can Do
You were given an idea on one of the greatest investor in the world under “What’s
New”. Now, imagine yourself as a great investor in your hometown. Create your own simple
interest word problem or compound interest word problem using your full name as the
character then solve for the unknown.
9
Post-Assessment
This section aimed to assess how much you have learned from the lesson. You are
still encouraged to answer honestly without any references. Write the letter of your answer on
your answer sheet. The use of a calculator is allowed.
Additional Activities
These problems are provided for you to master solving problems involving simple
interest. Identify the given then solve for the unknown. Show your solutions on your answer
sheet.
1. To buy the school supplies for the coming school year, you get a summer job at a resort.
Suppose you save ₱5,200.00 of your salary and deposit it into an account that earns simple
interest. After 10 months, the balance is ₱5,563.00. What is the annual interest rate?
2. In order to have ₱243,000.00 in 3 years, how much should you invest if the simple interest
is 2.5%?
3. When invested at an annual interest rate of 4%, an amount earned ₱10,200.00 of simple
interest in 230 days. How much is the future value?
4. If an entrepreneur applies for a loan amounting to ₱560,000.00 in a bank, the simple
interest of which is ₱157,530.00 for 3 years, what interest rate is being charged?
5. How long will an amount of money double at a simple interest rate of 4.5% per annum?
10
11
Pre – Assessment (What I Know)
1. D
2. A
3. C
4. C
5. D
6. B
7. C
8. D
9. A
10. A
What’s More
Activity
1. ₱4,583.33
₱254,583.33
2. 12.5%
Assessment
1. 2.07 years
2. ₱392,149.00
3. ₱9,528.75
Post - Assessment
1. D
2. A
3. D
4. C
5. D
5. B
7. D
8. A
9. B
10. B
Additional Activities
1. 8.38%
2. ₱225,649.66
3. ₱404,673.91
4. 13.05%
5. 22.22 years
Answer Key
REFERENCES
Department of Education (2016). General Mathematics Learner’s Material (1st Edition)
12