SIMPLE AND

COMPOUND INTEREST
GENERAL MATHEMATICS
CONVERT THE PERCENTS INTO
DECIMALS AND THE DECIMALS TO
PERCENTS.
1. 5%
2. 10%
3. 16%
4. 39%
5. 75%
6. 0.95
7. 0.0045
8. 0.02
9. 0.65
10. 0.010
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DEFINITION OF TERMS
• Lender or creditor - person (or
institution) who invests the
money or makes the funds
available
• Borrower or debtor - person
(or institution) who owes the
money or avails of the funds from
the lender
• Origin or loan date - date on
which money is received by the
borrower
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DEFINITION OF TERMS
• Repayment date or maturity date -
date on which the money borrowed or
loan is to be completely repaid
• Time or term (t) - amount of time in
years the money is borrowed or
invested; length of time between the
origin and maturity dates
• Principal (P) - amount of money
borrowed or invested on the origin
date
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DEFINITION OF TERMS
• Rate (r) - annual rate, usually in percent,
charged by the lender, or rate of increase
of the investment
• Interest (I) - amount paid or earned for
the use of money
• Simple Interest (Is) - interest that is
computed on the principal and then
added to it
• Compound Interest (Ic) - interest is
computed on the principal and also on
the accumulated past interests.
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EXAMPLE
Suppose you have Php 10,000 and
you plan to invest it for 5 years. A
cooperative group offers 2% simple
interest rate per year. A bank offers 2%
compounded annually. Which will you
choose and why?

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ACTIVITY
Suppose you have Php 10,000 and
you plan to invest it for 10 years. A
cooperative group offers 4% simple
interest rate per year. A bank offers 4%
compounded annually.

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SIMPLE INTEREST
interest that is computed on the
principal and then added to it. It
is the interest charged on the
principal alone for the entire
duration or period t of the loan or
investment, at a particular rate r.
After the term of the loan or
investment, the maturity value or
future value F is computed by
getting the sum of the principal
and the interest due.
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SIMPLE INTEREST (IS)
𝑰𝒔 = 𝑷𝒓𝒕
𝑭 = 𝑷 + 𝑰𝒔 or F = P(1 + rt)
Where:
Is - simple interest
P – principal
r – rate of interest per interest period
t – time/term (in year)
F – future value or maturity value
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EXAMPLE
1. Complete the table below by
finding the unknown
Principal
Rate (r) Time (t) Interest
(P)
(a) 2.5% 5 3000
30000 (b) 2 4500
200000 3% (c) 7500
500000 12% 3 (d)
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EXAMPLE
1. Complete the table below by
finding the unknown
Principal (P) Rate (r) Time (t) Interest
(a) 2.5% 5 3000
30000 (b) 2 4500
200000 3% (c) 7500
500000 12% 3 (d)

Answers: a) 24000 b) 7.5% c) 1.25 yrs d)

180000

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EXAMPLE
2. A bank offers 0.25% annual simple
interest rate for a particular deposit.
How much interest will be earned if 1
million pesos is deposited in this
savings account for 1 year?

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EXAMPLE
2. A bank offers 0.25% annual simple
interest rate for a particular
deposit. How much interest will be
earned if 1 million pesos is
deposited in this savings account
for 1 year?
Answer: 2500 pesos
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EXAMPLE
3. How much interest is charged
when P50,000 is borrowed for 9
months at an annual simple interest
rate of 10%?

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EXAMPLE
3. How much interest is charged
when P50,000 is borrowed for 9
months at an annual simple
interest rate of 10%?
Answer: 3750 pesos

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EXAMPLE
4. When invested at an annual
interest rate of 7%, an amount
earned P11,200 of simple interest
in two years. How much was
originally invested?

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EXAMPLE
4. When invested at an annual
interest rate of 7%, an amount
earned P11,200 of simple interest
in two years. How much was
originally invested?
Answer: P80,000

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EXAMPLE
5. If an entrepreneur applies for a
loan amounting to P500,000 in a bank,
the simple interest of which is
P157,500 for 3 years, what interest
rate is being charged?

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EXAMPLE
5. If an entrepreneur applies for a
loan amounting to P500,000 in a bank,
the simple interest of which is
P157,500 for 3 years, what interest
rate is being charged?
Answer: 10.5%

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EXAMPLE
6. How long will a principal earn an
interest equal to half of it at 5%
simple interest?

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EXAMPLE
6. How long will a principal earn an
interest equal to half of it at 5%
simple interest?
Answer: 10 years

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EXAMPLE
7. Find the maturity value if 1 million
pesos is deposited in a bank at an
annual simple interest rate of
0.25% after 6 years?

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EXAMPLE
7. Find the maturity value if 1 million
pesos is deposited in a bank at an
annual simple interest rate of
0.25% after 6 years?
Answer: 1,015,000 pesos

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