Name of Learner: __________________________________________________ Section: ________________

LEARNING ACTIVITY SHEETS

General Mathematics
SY 2021 – 2022 1st Semester
2nd Quarter Week 6
Background Information
In our daily life, our money is not always enough to finance our needs. We often resort to borrowing or
loans, may it be for personal or business interest.
Financial loan is a debt contract entered into by two parties, an organization or individual that states the
principal or amount of loan applied for, the interest rate, the mode of payment and the date of the payment. When
a borrower receives money, he is obliged to repay the principal plus interest on a mutually agreed date.

Learning Competencies:
The learner…
M11GM-IIf-1 - illustrates business and consumer loans.
M11GM-IIf-2 – distinguishes between business and consumer loans.
M11GM-IIf-3 – solves problems involving business and consumer loans (amortization, mortgage).

Discussion/Examples:
LESSON 1: Business and Consumer Loans
Financial loan is a debt contract entered into by two parties, an organization or individual, through a note
stating the principal amount, the interest rate, the mode of payment and the date of payment.
The money received by the borrower from the lender is called the principal and the borrower is obliged to
repay the principal with interest at a mutually agreed date. The interest serves as the monetary incentive for the
lender.
Loans can be classified as secured or unsecured. A secured loan is a loan that gives the lender the right to
take possession of a pledged borrower’s asset in case the former failed to settle his obligation. These assets are
referred to as the collateral and it can take the form of real-estate or other investments. An unsecured loan is a
loan that is not protected in case the borrower failed to meet the terms of repayment.
Loans can also be classified as Business Loan or Consumer Loan. A business loan is lent to business
companies to fund their business operations, to start a business or for expansion. A consumer loan, on the other
hand, is lent to an individual for personal or family purposes. Typical examples of consumer loans are credit
cards, retail loans, mortgages, and other house purchases.

Real life situations illustrating Business Loans and Consumer Loans.

Business Loans:
1. Mr. San Juan wants to borrow money from a bank to put up a mini grocery in their barangay.
2. Mang Mando who sell taho wants to expand his product, so he plans to apply for a loan for its expansion.
3. A family who runs a bakery shop decided to borrow money to open up a new branch.
4. Mr. Chan who owns a trucking business wants to buy more trucks for the expansion of his business, borrows
money from a bank.
5. A young entrepreneur who owns a water refilling station applies for a loan to buy a delivery service.

Consumer Loans:
1. Mrs. Reyes wants to refurnish their house by applying for a loan from a lending institution.
2. A young couple applying for a housing loan from a bank.
3. Mang Tonyo who borrows money from a lending institution to finance the college education of his children.
4. Jessa decided to purchase a condominium unit near her workplace. To do this, she has to apply for a loan
from a bank.
5. Mr. Roxas wants to take her family on vacation, so cover for their expenses have to apply for a vacation loan
package.

Definition of Terms:
• Business Loan – money lent specifically for a business purpose. It may be used to start a business.
• Consumer Loan – money lent to individual for personal or family purpose.
• Collateral – assets used to secure the loan. It may be real-estate or other investments.

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 LESSON 2: Solving Problems on Business and Consumer Loans (Amortization and Mortgage)

Amortization and Mortgage)

Definition of Terms:
1. Amortization Method – is the process of paying a loan and its interest on installment basis through series of
equal amounts at regular intervals.
2. Mortgage – a secured loan by a collateral that the borrower is obliged to pay at specified terms.
3. Chattel Mortgage – a mortgage on a movable property.
4. Collateral – assets used to secure the loan. It may be real-estate or other investments.
5. Outstanding Balance – any remaining debt or loan at a specified time.

Example 1. Mr. Antonio borrowed ₱2,000,000 from a bank for the expansion of his business. The effective rate
of interest is 7% compounded annually. How much is to be repaid after 4 years?
Given: P = ₱2,000,000 t=4
1
𝑖 = 7% = 0.07 n=4
m = 1 (compounded annually)
𝑖𝑚
j = 0.07 where j = 𝑚
and n = mt
Find: F
Solution:
F = P (1 + 𝑗)𝑛
= ₱2,000,000 (1 + 0.07)4 = ₱2,621,592.02
The amount to be repaid after 4 years is ₱2,621,592.02

Example 2. (Chattel mortgage) Jason borrowed ₱1,500,000 from a bank to buy a brand-new car. If his monthly
payment is ₱35,000 on a 5-year mortgage, how much interest will he pay?
Given:
P = ₱1,500,000 monthly payment = ₱35,000
t = 5 years
Solution:
Total amount paid = ₱35,000(12 months) (5 years)
= ₱2,100,000
Total interest = total amount paid – amount of mortgage
= ₱2,100,000 – ₱1,500,000 = ₱600,000
The total interest paid over 5 years is ₱600,000

Example 3. If a house and lot is sold for ₱3,000,000 and the bank requires a 25% down payment, find the amount
of mortgage.
Given:
P = ₱3,000,000
Down payment = 25% = 0.25
Solution:
Down payment = down payment rate x cash price
= (0.25) (₱3,000,000) = ₱750,000
Amount of Loan (Mortgage) = cash price – down payment
= ₱3,000,000 – ₱750,000 = ₱2,250,000
Therefore, the amount of mortgage is ₱2,250,000

Example 4. Mr. Reyes bought a delivery truck. After paying for the down payment, the amount of loan is ₱800,000
with an interest rate of 9% compounded monthly for 3 years. How much is the monthly payment?
Given:
P = ₱800,000 t=3
𝑖 12 = 9% = 0.09 n = 36
m = 12 (compounded monthly)
𝑖𝑚
j = 0.0075 where j = 𝑚
and n = mt
Find:
R = ? (regular payment)

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Solution:
1− (1+𝑗)−𝑛
P=R 𝑗
1− (1+0.0075)−36
₱800,000 = R 0.0075
₱800,000 = R (31.44680525)
₱800,000
31.44680525
=R
₱25,439.79 = R
Hence, the regular monthly payment is ₱25,439.79

Example 5. Mrs. Ching borrowed some money from a bank that offers an interest rate of 8.1% compounded
monthly. Her monthly amortization is ₱15,000 for 5 years. How much is the outstanding balance after the 20th
payment?
Given:
R = ₱15,000 k = 20 (number of payments paid)
12
𝑖 = 0.081 n = 60 (total number of payments)
0.081
j = 12 = 0.00675 n – k = 40 (number of payments remain)
Find:
P = ? (present value after 20 payments)
Solution:
1− (1+𝑗) −(𝑛−𝑘)
P=R
𝑗
1− (1+0.00675) −(40)
P = ₱15,000 = ₱524,283.73
0.00675
The outstanding balance after the 20th payment is ₱524,283.73

Example 6. Bobet and Lyn purchased a farm worth ₱8,000,000. They paid a down payment of ₱800,000 and
plan to amortize the remaining by paying monthly for 15 years. The banks interest is 7.5% compounded monthly.
a. How much is the monthly payment?
b. What is the total interest paid?

Given:
P = ₱7,200,000 t = 15
𝑖 12 = 0.075 n = 180
m = 12
0.075
j = 12 = 0.00625
a. Find:
a. R = ? (regular payment)

Solution:
1− (1+𝑗)−𝑛
P=R 𝑗
1− (1+0.00625)−180
₱7,200,000 = R 0.00625
₱7,200,000 = R (107.87342684)
₱7,200,000
107.87342684
=R
₱66,744.89 = R
The monthly payment is ₱66,744.89

b. Find the total interest

Since there are 180 total payments, the total payment is,
Total payment = ₱66,744.89 (180)
= ₱12,014,080.18
Interest Amount = ₱12,014,080.18 - ₱7,200,000
= ₱4,814,080.18
The total interest amount is ₱4,814,080.18

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Exercises:

A. Directions: Identify the following whether the statement illustrates a business loan or consumer loan.
1. Mr. Lim wants to have another branch for his cellphone repair shop. He decided to apply for a loan that
he can use to pay for the rentals of the new branch.
2. Mr. Trillas runs a trucking business. He wants to buy three more trucks for expansion of his business.
He applied for a loan in a bank.
3. Mrs. Alonzo decided to take her family for a vacation. To cover the expenses, she decided to apply for
a loan.
4. Glenn decided to purchase a condominium unit near his workplace. He got a loan worth
₱2,000,000.
5. Mr. Galang renovated his house for ₱80,000. This was made possible because of an approved loan
worth ₱75, 000.

B. Directions: Solve the following problems.

1. A business loan of ₱100,000 is to be repaid in full after 5 years. If the interest rate is 14%
compounded annually, how much should be paid after 5 years?
2. Jericho obtained a motorcycle loan of ₱75,000 that will be paid in full after 2 years at a rate of 8%
compounded quarterly. How much is to be paid after that time?
3. Jason obtained a condominium unit loan of ₱3,600,000. If the monthly payment is ₱25,000 for
20 years, what is the total interest.
4. Jessica applied for a business loan of ₱4,000,000 to be paid monthly for 12 years at 8.4%
convertible monthly. What is the monthly payment?
5. Ryan got a business loan and is being amortized by paying ₱30,000 monthly for 36 months at a rate
of 9% compounded monthly. How much is the outstanding balance after the 18th payment?

References:
General Mathematics – Learner’s Material, Verzosa, Debbie Marie, et. Al., Department of
Education, pp. 225 – 235
General Mathematics, Oronce, Orlando A. (2016) Rex Bookstore, Inc., Manila, Philippines,

Prepared by: DIHS - SHS Mathematics Department

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Name of Learner: __________________________________________________ Section: ________________

LEARNING ACTIVITY SHEETS

General Mathematics
SY 2021 – 2022 1st Semester
2nd Quarter Week 6

ANSWER SHEET

A. Directions: Identify the following whether the statement illustrates a business loan or consumer loan.
1.
2.
3.
4.
5.

B. Directions: Solve the following problems. Show your solutions.

1.

2.

3.

4.

5.

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