SIMPLE

INTEREST
Engr. Anthony T. Reyes
SIMPLE INTEREST
Interest: The amount of money paid for the use of money called the capital
for a certain period of time.

Simple Interest: The interest to be paid which is proportional to the length of time
the principal is used.

Principal: The amount of money used on which the interest is charged.

Rate of Interest: The amount earned by one unit of principal during a unit of time.

Ordinary Interest: An interest based on the exact number of one bankers year which
is equal to 12 months.
one month = 30 days
one year = 360 days

Exact Interest: An interest based on the exact number of days, 365 days for
ordinary year and 366 days for a leap year.
SIMPLE INTEREST

The capital originally invested in a transaction is called

PRINCIPAL (P). At any time after the investment of principal,
the sum of the principal and the interest due is called FUTURE
AMOUT (F).
𝐹 =𝑃+𝐼
𝐼 = 𝑃𝑟𝑡
Exact interest for t days: Ordinary interest for t days:

𝑡 𝑡
𝐼 = 𝑃𝑟 𝐼 = 𝑃𝑟
365 360
SIMPLE INTEREST
Simple Discount:
𝑃+𝐼 =𝐹
𝐼 = 𝐹𝑑𝑡 𝑃 + 𝐹𝑑𝑡 = 𝐹
𝐼 = 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑃 = 𝐹 − 𝐹𝑑𝑡
𝐹 = 𝑎𝑚𝑜𝑢𝑛𝑡 𝑑𝑢𝑒 𝑎𝑡 𝑡ℎ𝑒 𝑒𝑛𝑑 𝑜𝑓 𝑡𝑖𝑚𝑒
𝑑 = 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒
𝑃 = 𝐹 1 − 𝑑𝑡

Banker’s Discount:

𝑑
𝑖=
1−𝑑
SIMPLE INTEREST

Discount:
It is the difference between the
future worth and its present worth.

Rate of Discount: Equivalent Rate of Interest:

It is the discount on one unit of
principal per unit of time.
𝑑
𝑑 = 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑖= 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
1−𝑑

𝑖
𝑑= 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡
1+𝑖
EXAMPLES
1. A bank charges 12% simple interest on a ₱300 loan. How much will
be repaid if the loan is paid back in one lump sum after 3 years?
𝐹 =𝑃+𝐼
𝐹 = 𝑃 + 𝑃𝑟𝑡 𝑭 = ₱𝟒𝟎𝟖. 𝟎𝟎
𝐹 = ₱300 + ₱300 0.12 3

2. If you borrowed money from your friend with simple interest of

12%, find the present worth of ₱50,000; which due at the end of 7
months?
𝐹 =𝑃+𝐼
₱50,000
𝐹 = 𝑃 + 𝑃𝑟𝑡 𝑃=
7 𝑷 = ₱𝟒𝟔, 𝟕𝟐𝟖. 𝟗𝟕
1 + 0.12
7 12
₱50,000 = 𝑃 + 𝑃 0.12
12
EXAMPLES
3. ₱5,000 is borrowed for 75 days at 16% per annum simple interest.
How much will be due at the end of 75 days?
𝐹 =𝑃+𝐼
𝐹 = 𝑃 + 𝑃𝑟𝑡 𝑭 = ₱𝟓, 𝟏𝟔𝟔. 𝟔𝟕
75
𝐹 = ₱5000 + ₱5000 0.16
360

4. If you borrowed money from your friend with simple interest of

12%, find the present worth of ₱20,000 which is due at the end of
nine months?
𝐹 =𝑃+𝐼
₱20,000
𝐹 = 𝑃 + 𝑃𝑟𝑡 𝑃=
9 𝑷 = ₱𝟏𝟖, 𝟑𝟒𝟖. 𝟔𝟎
1 + 0.12
9 12
₱20,000 = 𝑃 + 𝑃 0.12
12
EXAMPLES
5. Kathy buys a television set from a merchant who asks ₱1,250 at the
end of 60 days (cash in 60 days). Kathy wishes to pay immediately,
and the merchant offers to compute the cash price on the
assumption that money is worth 8% simple interest. What is the
cash price today?
𝐹 =𝑃+𝐼
₱1250
𝐹 = 𝑃 + 𝑃𝑟𝑡 𝑃=
60 𝑷 = ₱𝟏, 𝟐𝟑𝟑. 𝟓𝟓
1 + 0.08
60 360
₱1,250 = 𝑃 + 𝑃 0.08
360
6. Find the amount due at the end of 15 months whose present value
is ₱2,000 at 5% simple interest.
𝐹 =𝑃+𝐼
𝑭 = ₱𝟐, 𝟏𝟐𝟓. 𝟎𝟎
𝐹 = 𝑃 + 𝑃𝑟𝑡
15
𝐹 = ₱2000 + ₱2000 0.05
12
EXAMPLES
7. Mr. Ignacio made a money market placement of ₱1,000,000 for 30
days at 7.5% per year. If the withholding tax is 20%, what is the net
interest that Mr. Ignacio will receive at the end of month?
𝐼 = 𝑃𝑟𝑡
30
𝐼 = ₱1,000,000 0.075 𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = ₱6,250 − 0.2 ₱6,250
360
𝐼 = ₱6,250
𝑵𝒆𝒕 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 = ₱𝟓, 𝟎𝟎𝟎
8. A loan was made 3 years and 4 months ago at 6% simple interest.
The principal amount of the loan has just been repaid along with
₱800 of interest. Compute the principal amount of the original
loan.
₱800
𝐼 = 𝑃𝑟𝑡 𝑃=
3 12 + 4
3 12 + 4 0.06
₱800 = 𝑃 0.06 12
12
𝑷 = ₱𝟒, 𝟎𝟎𝟎. 𝟎𝟎
EXAMPLES
9. A bank loan of ₱2,000 was made at 8% simple interest. How long
would it take in years for amount of the loan and interest to equal
₱3,280? 𝐹 = 𝑃 + 𝑃𝑟𝑡
₱3280 = ₱2000+₱2000 0.08 𝑡
₱3280 − ₱2000 𝒕 = 𝟖 𝒚𝒆𝒂𝒓𝒔
𝑡=
₱2000 0.8

10.A man deposit ₱100,000 for one year which pays 6% interest
annually. He has a taxable income and the bank charges a
withholding tax of 20% incremental income tax rate. Compute the
after tax income of his deposit.
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝐼𝑛𝑐𝑜𝑚𝑒 = ₱100000 0.06 = ₱6000 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 𝐼𝑛𝑐𝑜𝑚𝑒 = ₱6000 − ₱1200
𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑎𝑥 = ₱6000 0.20 = ₱1200
𝑨𝒇𝒕𝒆𝒓 𝑻𝒂𝒙 𝑰𝒏𝒄𝒐𝒎𝒆 = ₱𝟒, 𝟖𝟎𝟎. 𝟎𝟎
THANK YOU
and
GOD BLESS