Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

4.1. Investments, Interest Rate, and Rental Concerns of

Filipino Entrepreneurs

Let’s Connect
1. Which product would you consider starting according to the business plan
presented? Explain why.
Answers may vary. ​They can write any business they would like to create as long as
it is realistic and time-bound.

2. What do you think your group needs to do in order to pitch your product to Mr.
Santos?
Answers may vary. ​Answers should be based on the explanation of the groups and
how they will persuade their classmates that their product is better.

3. What location would you choose if you were the business owner? Explain your
answer.
Answers may vary. ​Answers should be based on the explanation of the groups and
how they will persuade their classmates that their location is better.

Check Your Progress

1. Jake wants to start an ice cream business. So he gets a loan of ₱50,000 from a bank,
payable within six months, with a nominal interest of 5%. Solve for the interest and
monthly payment with interest of Jake's loan.

Interest = (₱50,000 x 5%) / 6 months

= ₱2,500 / 6
​= ₱​416.67

MPWI = ₱50,000 / 6 months

​= ₱​8,333.33

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 Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

MPI = MPWI + Interest

= ₱8,333.33 + ₱416.67
​ = ₱​8,750

2. Junnie loans ₱40,000 from a lending company to start his carwash business. The loan
has an effective interest rate of 8%, payable within two months. How much are the
interest per month and monthly payment with interest on his loan?

1st month interest = (₱40,000 x 8%) / 2 months

= ₱3,200 / 2
1st month interest = ₱​1,600

MPWI = ₱40,000 pesos / 2 months

​= ₱​20,000

MPI = MPWI + Interest

= ₱20,000 + ₱1,600
​= ₱​21,600

Remaining Loan = ₱40,000 - ₱21,600

​= ₱​ 18,400

Interest = (₱18,400 x 8%) / 2 months

= ₱1,472 / 2
2nd month interest = ₱​736

MPI = MPWI + Interest

= ₱18,400 + ₱736
MPI = ₱​19,136

3. What is the advantage of getting flat rate interest?

Answers may vary. ​Answers should be based on their understanding. A possible

4.1. ​Investments, Interest Rate, and Rental Concerns of F

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 Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

explanation could be the flat rate can be favorable against inflation because the
payment will be much lower.

4. Gervin wants to get a ₱20,000 loan from a bank to start a milk tea business. The
loan has a 10% interest, and it must be paid within three months. If he can choose
between nominal and effective interest rates, which is more profitable for him?

Nominal Interest Effective Interest

Interest = (₱20,000x 10%) / 3 1st month interest = (₱20,000 x 10%) / 3

= ₱2,000 / 3 = ₱2,000 / 3
​= ​₱666.67 1st month Interest = ​₱666.67

MPWI = ₱20,000 / 3 months MPWI = ₱20,000 / 3 months

= ₱​ ​6,666.67 = ​₱​6,666.67

MPI = MPWI + Interest MPI = MPWI + Interest

= ₱6,666.67 + ₱666.67 = ₱6,666.67 + ₱666.67
= ₱​ ​7,333.34 = ​₱​7,333.34

Total payment = MPI x 3 months Remaining Loan = ₱20,000 - ₱7,333.34

= ₱7,333.34 x 3 ​ = ₱​ 12,666.66
= ₱​22,000.02
2nd month interest = (₱12,666.66 x 10%)
/ 3 months
= ₱1,266.66 / 3
2nd month interest = ₱​ 422.22

MPWI = ₱12,666.66 / 3 months

= ​₱​4,222.22

MPI = MPWI + Interest

= ₱4,222.22 + ₱422.22

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 Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

= ​₱​4,644.44

Remaining loan = ₱12,666.66 - ₱4,644.44

​ = ₱​ 8,022.22

3rd month interest = ₱8,022.22 pesos x

10% / 3 months
= ₱802.22 / 3
3rd month Interest =​ ​₱267.41

MPI = MPWI + Interest

= ₱8,022.22 + ₱267.41
= ​₱​8,289.63

Total payment = 1st month MPI + 2nd

month MPI + 3rd month MPI
= ₱7,333.34 + ₱4,644.44 + ₱8,289.63
= ​₱​20,267.41

Gervin should pick a loan with an effective interest because the total from all his
monthly payments will be ₱20,267.41. It is lower than if Gervin will choose a
nominal rate, which will amount to ₱22,000.02.

5. Knowing the pros and cons of rent business in the Philippines, would you still
consider it as your business?
Answers may vary​. Hopefully, the students will consider starting a rental business
because they know what they should avoid and improve for the company.

6. King decides to loan ₱30,000 from a bank with an interest rate of 3% payable within
two months. The CPI rates for the two months are 2.5% for the first month and 4%
for the second month. Create a sample interest rate computation based on this
problem.

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 Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

Time CPI rate + Interest Rate Interest Amount

(in %)

1st month 2.5% + 3% = 5.5% ₱1,650

2nd month 4% + 3% = 7% ₱2,100

Try This!
True or False. W
​ rite ​true i​ f the statement is correct. Otherwise, write f​ alse.

False 1. Investment is an asset obtained without the intention of

producing sales or income.

True 2. Appreciation refers to an increase of an object’s value over

time.

True 3. One of the benefits of investing is to combat inflation.

True 4. Interest rate ​is the amount a lender charges for the use of
assets expressed as a percentage of the principal amount.

False 5. There are five ways to calculate interest rates.

True 6. Nominal interest is also known as fixed interest.

False 7. Floating rate does not depend on the CPI or Philippine Stocks
Exchange for its rate of interest.

True 8. Flat rate is a predefined fee or payment on top of the value of

the purchase.

True 9. Rent is a good form of investment because of its demand, high

occupancy rate, affordable property price, and growth
potential.

True 10. One of the rental concerns you need to consider is risk.

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 Unit 4: Contemporary Economic Issues Facing the Filipino Entrepreneur

B. Identification. ​Choose the correct answer that describes each situation from the
box below. Write them on the space provided.

Big capital investment Risk

Location Population

Location 1. Allan went to Quezon City to find the right spot for his
business.

Population 2. Aileen only accepts a male bedspacer in her apartment.

Risk 3. Angela lost 50% of her capital because she did not plan
carefully what business she would start.

Big capital 4. Beejay took a loan program to buy a lot in Laguna for his
investment apartment business.

Big capital 5. For her startup company, Kristine agreed to rent a property
investment with a two-year contract.

Challenge Yourself
1. What factors would you consider in starting a business? Explain your answer.
Answers may vary. ​Answers should revolve around investment, risk, capital,
location, and other economic and environmental considerations.

2. Why could investing in real estate or rental business be a worthwhile opportunity?

Explain your answer.
Answers may vary. ​Answers should focus on how investing contributes to the
circular flow of the economy, mainly by allowing financial resources to circulate in the
market.

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