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PLM Business School-Department of Business Economics
COURSE CODE: MATHEMATICS OF INVESTMENT
Worksheet Module 1
Name and Section:
Date:

Exercise
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Modified True or False. Write TRUE if the stament is correct and change the
identified word if False.

1. True Simple discount refers to the amount deducted from the maturity value of an
obligation.

2. False The amount of money the borrowers received is called the Proceeds.

3. True The loan amount in simple interest is Face Value while Proceeds in Simple
Discount.

4 -5. False A simple interest is computed on the principal value while simple
discount is computed on the maturity value.

Assessment

Elaborate:

Computations:

1. Find the simple discount of Php 8,300 due at the end of 2 years at 7% simple
discount.

Solution:
D = Fdt
= 8,300 (0.07) (2)
= Php 1, 162 The borrower will receive Php 1,162 from the bank

1
 2. Find the proceeds on Php 10,000 due at the end of 3 years at 10% simple
discount.

Solution:
Pr = F (1 – dt)
= 10,000 [1 – (0.10) (3)]
= 10,000 (1 – 0.3)
= 10,000 (0.7)
= Php 7,000 The note will have proceeds of Php 7,000

3. Find the amount of the loan for 7 years at 6% simple discount rate if its
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proceeds are Php 20,000.

Solution:
𝐷
𝐹=
𝑑𝑡
20,000
𝐹=
(0.06)(7)
20, 000
𝐹=
0.42
= 𝑷𝒉𝒑 𝟒𝟕, 𝟔𝟏𝟗. 𝟎𝟒𝟕𝟔𝟐 𝒐𝒓 𝑷𝒉𝒑 𝟒𝟕, 𝟔𝟏𝟗. 𝟎𝟓
The loan must be repaid by Php 47, 619.05

4. Find the simple discount rate if Bella borrowed Php 2,300, 11 months note
and was charged Php 500 for the loan.

Solution:
𝐷
𝑑=
𝐹𝑡
500
𝑑=
(2,300)(0.92)
500
𝑑=
2,108.33
= . 𝟐𝟑𝟕𝟏𝟓 𝒐𝒓 𝟐𝟑. 𝟕𝟐 % The discount rate of the loan was 23.72%

5. How long will Php 25,000 accumulate to Php 29,000 if the discount rate is
5%?

Solution:
𝐷 𝐹−𝑃
𝑡= 𝑡=
𝐹𝑑 𝐹𝑑
29,000 − 25,000
𝑡=
(29,000)(0.05)
2
 4,000
𝑡=
1,450
= 2.758 or 2.76 years The note will end in 2.76 years

Reflection

Evaluate:

In obtaining a loan, which is a better approach between simple discount and

simple interest? From the perspective of:

A: Lender (who lends)

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Ans. The simple discount because the lender will have much more profit aside
of having the fee paid by the lendee through interest agreed upon as the
lendee will get the interest in advance that in return will make the lender
received fewer initial funds.

B: Lendee (whom something is lent)

Ans. The simple interest because it’s unfair that the bank or the lender to took
out the interest before giving out the proceeds, since the lendee will have the
same amount of interest whichever approach, he/she going to come up with in
obtaining the loan, the difference is that when he/she chose the “simple
discount rate” she’ll just received fewer initial funds that she needed.

https://people.highline.edu/mgirvin/YouTubeExcelIsFun/Busn135Ch08.pdf