TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - QUEZON CITY

1ST YEAR COLLEGE

Course Code: :GEC 004-BSME11S4

Professional Lecturer : Engr. Reynaldo B. Salvador Ed. D car,
Ph.D.
Student : Velos, Ralph Gian C.
Date :11/ 9/ 2023

Discussion 5
I. Simple Interest

Simple interest is a method of determining the amount of interest charged on a sum at a

specific rate and time period. The cost of borrowing money is referred to as interest. It is
often expressed as a percentage and represents a fee or charge paid to the lender in
exchange for the borrowed money. A fundamental knowledge of interest is provided by
simple interest computation. It gives a general overview of the subject of interest. To
assess whether you are paying or earning money, more complex techniques are usually
used. A loan may include fees in addition to interest.

II. Normal Effective Rate

The normal effective interest rate, often known as the effective interest rate (EIR), is a
measure of the true cost of a loan or financial product that takes into account interest
compounding over a certain period. It is expressed as an annual interest rate in order to
compare financial products with varying compounding times or expenses. Because it
takes into account the compounding impact, which indicates how interest is added to the
principal over time, this can be used to provide a more realistic depiction of a financial
product's true cost or return. It's a crucial concept to grasp when comparing financial
products and evaluating the true cost or return on an investment or loan.

Honor Pledge:

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work is my own ”