11

General
Mathematics
Quarter 2 – Module 1:
(Week 1 and 2)
SIMPLE and COMPOUND INTEREST
 What I Know (Pre-Test)

Instructions: Choose the letter of the correct answer. Write your answer on a
separate sheet of paper.

1. Which of the following does NOT refer to interest?

A. payment for borrowing one’s money C. deduction to the principal amount
B. portion or part of the principal amount D. increase in your invested money

2. What do you call the amount of money borrowed or invested at the origin date?
A. interest C. maturity value
B. future value D. principal amount

For items no. 3-4, use the situation below:

Joseph, who is working in a bank offering an annual interest rate of 5%, is

explaining to a client the maturity value of his ₱ 100,000 after 2 years through
an illustration. He is thinking of the following illustrations:

Term Interest
A. or
Principal (P) Interest Amount After t years
Time Rate (r)
(t) Solution Answer (Future Value)
1 100,000.00 0.05 (100,000)(0.05) 5000 100,000 +5000 = 105,000
2 200,000.00 0.05 (200,000)(0.05) 10,000 105,000 + 10,000 = 115,000

Term Interest
B. or Interest
Time
Principal (P) Amount After t years
Rate (r) Solution Answer
(t) (Future Value)
1 100,000.00 0.05 (100,000)(0.05) 5000 100,000 +5000 = 105,000
2 100,000.00 0.05 (100,000)(0.05) 5000 105,000 + 5,000 = 110,000

Term Interest
C. or
Principal (P) Interest Amount After t years
Time Rate (r)
(t) Solution Answer (Future Value)
1 100,000.00 0.05 (100,000)(0.05) 5000 100,000 +5000 = 105,000
2 105,000.00 0.05 (105,000)(0.05) 5250 105,000 + 5,250 = 110,250

3. What illustration must Joseph present if the bank offers simple interest?

4. What illustration must Joseph present if the bank offers compound interest?

5. Which of the following situation involves interest?

A. borrowing money from the bank C. pawning jewelry in pawnshops
B. investing money in an investing firm D. all of the above

6. You plan to borrow money from a bank that charges interest. If you are a wise
borrower, which bank and interest rate compounded annually will you choose?

A. Bank A- 2% C. Bank C -4%

B. Bank B- 3% D. Bank D- 5%

1
1. The principal amount is compounded quarterly, how many times will its interest
be compounded in a year?
A. 2 B. 4 C. 6 D. 12

2. What is the formula to be used in finding the rate (r) of simple interest problem?
𝐹 𝐼 𝑭 𝑛𝑡 𝐹
𝐴.
( 1+𝑟∙𝑛∙𝑡 )
B.
𝑃∙𝑛∙𝑡
C. 𝑟 𝑛𝑡
D. 𝑛 ( √𝑃 − 1)
(1+ )
𝑛

3. How much money will you have after 6 years if you deposited ₱ 10,000 in “Siguro”
bank that pays 0.5% simple interest?
A. ₱ 300.00 B. ₱ 303.78 C. ₱ 10,300.00 D. ₱ 10,303.78

10. Maria borrowed ₱ 1,500 from a friend for 2 years at 2% simple interest per 6 months.
How much interest will she have to pay?
A. ₱ 60 B. ₱ 120 C. ₱ 1620 D. ₱ 1750

11. How much should you invest at 6% annual interest rate to obtain a simple
interest of ₱ 72,000 in 3 years?
A. ₱ 350,000 B. ₱ 400,000 C. ₱ 450,000 D. ₱ 500,000

12. Find the future value of ₱ 50,000 after 2 years at 4% interest rate compounded
monthly.
A. ₱ 4,000.00 B. ₱ 4,157.18 C. ₱ 54,000.00 D. ₱ 54,157.15

13. Find the interest of ₱ 6,500 after 5 years at 2.5% interest rate compounded
semi-annually.
A. ₱ 812.50 B. ₱ 859.76 C. ₱ 7,312.50 D. ₱ 7359.76

14. Lester must pay ₱ 15,500 to pay an obligation of ₱ 12,000 at 6% compounded

monthly. After how many years, should this payment be given?
A. 2.28 yr B. 3.28yr C. 4.28 yr D. 5.28 yr

15. At what interest rate compounded quarterly should an amount be invested if the
interest earned is 20% of the invested amount for 5 years?
A. 2.66 % C. 4.66 %
B. 3.66% D. can’t be determined

2
 Lesson Fundamentals of Interest
1

What I Need To Know

At the end of this lesson, you are expected to:

o identify the terms related to interest; and
o formulate the formula of interest and future value
o compare and contrast simple and compound interest

What’s In

Review the basic concepts of decimals and percentages.

A. Express each as decimal. B. Give what is asked.

1) 12% = 0.12 1) What is 45 % of 100? 0.45

2) 3% = 0.03 PART = BASE x RATE (In Decimal)

PART = 100 x 0.45
PART = 45
3) 0.75% = 0.0075

What’s New

1) What happens to your money when you deposit it in a bank or

invest it in an investing firm?
2) When you borrow money in a bank, what is always part of
the payment agreement? Image 1

Money invested or borrowed from a bank will usually gain interest. The gaining
of interest can be favorable or unfavorable and it depends on the situation. For
example, if you are an investor you will most likely be excited with the interest but if
you are a borrower you will most likely wish it to not exist.

What is an interest?
It is the amount paid or earned for the use of money.

Borrower’s Perspective : It is the payment for borrowing one’s money.

Investor’s Perspective : It is the amount of increase in your invested money.

3
 What Is It

Situation 1: Saphira borrowed ₱ 15,000.00 from OCS lending firm to

start her own online business. She received the money on June 5, 2020
and expected to pay it after 2 years with a 3 % annual interest.
a) What are the terms related to interest found in the situation?
b) How much is the interest? Image 2

c) How much will she pay after 2 years?

a) The following are the related terms of interest in Situation 1.

GIVEN LABEL
• Saphira - Borrower or Debtor
• OCS Lending Firm - Lender or Creditor
• June 5, 2020 - Origin or Loan Date
• June 5, 2022 - Repayment Date or Maturity Date
• Php 15,000.00 - Principal Amount or Present Value (P)
• 3% - Rate (r)
• 2 years -Time or Term (t)

b) How much is the interest?

The annual interest or interest per year is 3% of 15,000. This means we need
to get a PART of 15,000 that is 3% of it.

Recall: PART = BASE x RATE (In Decimal)

PART = 15,000 x 0.03
PART = 450

Using the concepts above, we can say that the INTEREST is equivalent
to PART and PRINCIPAL AMOUNT to BASE thus the formula of interest
will be…
INTEREST ( I ) = PRINCIPAL AMOUNT (P) x RATE (r)

However, this is the computation of interest for one year only. If the term
is 2 years, we can multiply the interest by 2, thus our final formula of
interest will be…
Formula

INTEREST ( I ) = PRINCIPAL AMOUNT (P) ∙ RATE (r) ∙ TERM(t)

Solution (using the formula):

𝑰 = 𝑷∙𝒓∙𝒕
𝐼 = 15,000 ∙ 0.03 ∙ 2
𝐼 = 900.00

4
 Saphira will pay an interest of ₱ 900.00 for borrowing money.
b. How much will she pay after 2 years?

The total payment, Saphira will pay after two years, is called, FUTURE
VALUE or MATURITY VALUE.

Formula

Future or Maturity Value (F) = Principal Amount (P) + Interest (I)

Solution (using the formula):

𝑭= 𝑷+𝑰
F = 15, 000 + 900
F = 15,900

Saphira will pay a total of ₱ 15,900.00 after 2 years.

Situation 2: You plan to invest your ₱ 42,000.00 in a bank.

You choose between “Masaligan” Bank which offers an annual
simple interest rate of 4% and “Matino” Bank which offers an
annual compound interest rate of 4%. Image 3

a) What are the terms related to interest found in the situation?

b) Illustrate the difference between simple and compound interest.
c) Which bank will you invest your money?

Solution:

a) The following are the related terms of interest in Situation 2.

GIVEN LABEL
• You - Investor
• ₱ 42,000.00 - Principal (P)
• 6% - Interest rate (r)
• 3 years - Time or Term (t)
• “Masaligan” Bank - Investment Banks
“Matino Bank”

5
b) The table or time diagram below illustrates the difference between simple and
compound interest.

“Masaligan” Bank
Simple Interest Table
End of Simple Interest (I)
Computed between consecutive years Amount at the end of __ (year)
____ Principal (P) Interest
(year) Solution Answer (Future Value)
Rate (r)
42,000.00 0.04 (42,000)(0.04)(1) 1680 42,000 + 1680 = 43,680
1st
42,000.00 0.04 (42,000)(0.04)(1) 1680 43,680 + 1680 = 45,360
2nd
42,000.00 0.04 (42,000)(0.04)(1) 1680 45360 + 1680 = 47,040
3rd

Simple Interest Time Diagram

Present r = 4% End of r = 4% End of r = 4% End of

1st year 2nd year 3rd year
0 I = 1680 I = 1680 I = 1680

Principal Amt = 42,000 Principal Amt = 42,000 Principal Amt = 42,000 Principal Amt
= 42,000

“Matino” Bank
Compound Interest Table
End of Compound Interest (I)
Computed between consecutive years Amount at the end of __ (year)
____ Principal (P) Interest
(year) Solution Answer (Future Value)
Rate (r)
42,000.00 0.04 (42,000)(0.04)(1) 1680 42,000 + 1680 = 43,680
1st
43,680.00 0.04 (43,680)(0.04)(1) 1,747.2 43,680 + 1747.20 = 45,427.2
2nd
45,427.20 0.04 (45,427.2)(0.04)(1) 1,817.09 45,427.20 + 1,817.19 = 47,244.29
3rd

Compound Interest Time Diagram

Present r = 4% End of r = 4% End of r = 4% End of

0 yr 1st year 2nd year 3rd year
I = 1680 I = 1,747.2 I = 1,817.09

Principal Amt = 42,000 Principal Amt Principal Amt Principal Amt

= 43,680 = 45,427.20 = 47,244.29

After 3 years:
• You will receive ₱ 47,040.00 from Masaligan Bank who is offering a
4 % simple interest.
• You will receive from ₱ 47,244.29 Matino Bank 47,244.29 who is
offering a 4 % compound interest.

6
 c) Which bank will you invest your money? Why?
▪ It is better to invest your money in Matino Bank who is offering a 4%
compound interest for it has greater future value.

Things to Remember:

▪ The principal amount of the bank with simple interest remains the same
throughout the term while the bank with compound interest changes every
year. The new principal amount is found by adding the previous interest and
the previous principal amount.
▪ The interest of the bank with simple interest remains the same throughout
the term while the bank with compound interest changes every year which is
a result of the changing principal amount.

What’s More

Activity 1.1: NOW IT’S YOUR TURN!

Instructions: Use the terms learned in this lesson to complete the crossword puzzle
below. Write your answer in a separate sheet of paper.

ACROSS

3. Another term for Future Value or amount after t years that the lender receives
from the borrower on the maturity date
7. Amount of money borrowed or invested on the origin date
8. Date on which the money is received by the borrower
9. Usually in percent, charged by the lender, or rate of increase of the investment

DOWN

1. Term or amount in time in years the money is borrowed or invested

2. Amount paid or earned for the use of money
4. Another term for maturity date, a date on which the money borrowed is to be
completely repaid
5. Another term for creditor or a person (or institution) who invests the money or
makes the funds available
6. Another term for debtor or a person (or institution) who owes the money or avails
of the funds from the lender

7
B. Write S if the statement refers to simple interest, C if it is compound interest and
B if it can be both simple and compound interest on the space provided.

__________1) The interest rate is the same all throughout the term
__________2) Higher maturity value except for the first year
__________3) Can be compounded weekly, monthly, semiannually, or annually
__________4) Principal Amount is the same all throughout the term
__________5) Investment earns the same amount of interest each year
__________6) Amount of interest earned increases from one period to the next

What I Need To Remember

▪ Interest - It is the amount paid or earned for the use of money

▪ Formula of interest: 𝐼 = 𝑃 ∙ 𝑟 ∙ 𝑡
▪ Principal Amount or Present Value- Amount of money borrowed or invested
on the origin date
▪ Maturity or Future Value - Amount after t years that the lender receives from
the borrower on the maturity date or the investor receives from the investing
firm on the maturity date
▪ Formula of Future Value: 𝐹 = 𝑃 + 𝐼
▪ Simple interest can be computed by multiplying the principal, which is
constant all throughout the term, and rate.
▪ Compound interest is computed on the principal and the previously earned
interests which makes it different every year.

8
 Lesson Finding Interest and Future Value
2 in a Simple Interest Environment

What I Need To Know

At the end of this lesson, you are expected to:

o find simple interest; and
o solve Future or Maturity value in a simple interest environment.

What’s In

● Recall the formula of interest.

𝑰 = 𝑷 ∙ 𝒓 ∙ 𝒕, where
I is the interest, P is the principal amount, r is the rate and t is time

This is also the basic formula of simple interest.

What’s New

Simple interest can be computed

per year (annual) per quarter (3 months)
per 6 months per month

Situation 1:

Compute the simple interest when Rowena lent ₱ 800.00 for 1 year to Dessa at 1%

per a) year;. b) 6 months; c) quarter; or d) month.

Recall: 1% of 800 is 8.

Solutions:

a) per year b) per 6 months

1 year 1 year

8 6 months 6 months
8 8

Interest = ₱ 8 Interest = ₱ 16

9
 c) per quarter d) per month

1 year 1 year

3 mo 3 mo 3 mo 3 mo 1 1 1 1 1 1 1 1 1 1 1 1
mo mo mo mo mo mo mo mo mo mo mo mo

8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8

Interest = ₱ 32 Interest = ₱ 96

What is It

The formula of simple interest 𝑰 = 𝑷 ∙ 𝒓 ∙ 𝒕 can be used when the interest is computed
every year however there are situations where it can be computed per month, per
quarter, per 6 months etc. thus our final formula in finding simple interest is:

Simple Interest Formula

𝐼 =𝑃∙𝑟∙𝑛∙𝑡
Where :

I is the interest
P is the Principal Amount
r is the interest rate
n is the number of times the interest is computed in a year
t is the number of years or the term in years

Using the simple interest formula, we can obtain the formula of Future or Maturity
Value

Future Value or Maturity Value

Future Value = Principal + Interest

𝐹 =𝑃+𝐼
𝐹 =𝑃 + 𝑃∙𝑟∙𝑛∙𝑡
𝑭= 𝑷(𝟏+𝒓∙𝒏∙𝒕)
Where :
F is the maturity or Future Value
P is the Principal Amount
I is the interest
r is the interest rate
n is the number of times the interest is computed in a year
t is the number of years or the term in years

10
 Things to Remember:

• When the problem gives a term not in years, you need to convert it first to
years before you input it in the formula.
• Computing Period and the Number of times the interest is computed in a year

Number of Times the Interest is

Computing Period Computed in a Year ( n )

Per Year (Annual) 1

Per 6 months 2
Per Quarter 4
Per Month 12

EXAMPLES:
1) Find the amount of interest of ₱ 1,500.00 at 3% annual simple interest rate for 2
years.

Given: P = 1,500
r = 0.03
t = 2 yr
n = 1 (annual simple interest)
Find: I
Solution:
𝐼 = 𝑃∙𝑟∙𝑛∙𝑡
𝐼 = (1500)(0.03)(1)(2)
𝐼 = 90

Therefore, the interest is ₱ 90.00.

2) Find the future value of ₱ 5,000 at 2.5% simple interest rate per month for 3 years.
Given: P = 1,500 r = 0.025 t=3 n = 12 (per month)

Find: F

Solution:
𝐹 = 𝑃(1+𝑟∙𝑛∙𝑡)
𝐹 = 5,000 ( 1 + (0.025)(12)(3) )
𝐹 = 5,000 ( 1 + 0.9 )
𝐹 = 9,500
Therefore, the future value is ₱ 9,500.00.

11
 What’s More

Activity 1.2: NOW IT’S YOUR TURN!

Instructions: Write your answers on a separate sheet of paper. Round off your final
answers to hundredths place.

A. Find the simple interest of the following:

1) ₱ 2,000.00 at 3% annual simple interest rate for 10 years

2) ₱ 3,400.00 at 6% simple interest rate per quarter for 4 years

B. Copy the table and give the simple interest and future value.

Principal Future Value

Interest Rate (r) Time (t) Interest (I)
Amt (P) (F)
₱ 850 10 % 3 yr
₱ 2550 4 % per quarter 5.5 yr
₱ 42,800 1 % per semi-annual 6 months

What I Need To Remember

SIMPLE INTEREST FORMULA 𝑰 = 𝑷∙𝒓∙𝒏∙𝒕

FUTURE VALUE OR MATURITY VALUE (SIMPLE INTEREST)

𝑭 = 𝑷(𝟏+𝒓∙𝒏∙𝒕)

Lesson Finding Interest and Future Value

3 in a Compound Interest Environment

What I Need To Know

At the end of this lesson, you are expected to:

• find compound interest; and
• solve the Future or Maturity value in a compound interest environment.

12
 What’s New

The table below illustrates compound interest.

Compound Interest Table
Term/ Compound
Interest Amount After t years
Time Interest
Principal (P) Rate (Future Value)
(t)
(r) Solution

1 𝑃 r 𝑃∙𝑟 𝑃+ 𝑃∙𝑟 or 𝑃 (1 + 𝑟)

2 𝑃 (1 + 𝑟) r 𝑃 (1 + 𝑟) (𝑟) 𝑃(1 + 𝑟) + 𝑃 (1 + 𝑟) (𝑟) or 𝑃 (1 + 𝑟)(1 + 𝑟)

𝑃 (1 + 𝑟)(1 + 𝑟) + 𝑃 (1 + 𝑟)(1 + 𝑟)(𝑟) or
3 𝑃 (1 + 𝑟)(1 + 𝑟) r 𝑃 (1 + 𝑟)(1 + 𝑟) (𝑟)
𝑃 (1 + 𝑟)(1 + 𝑟)(1 + 𝑟)

Questions to Ponder:
• Did you see a pattern in the table?
• What is the role of time in the observed pattern?
• What is the future value after “t” years in a compound interest environment?

What Is It

Using the pattern in the compound interest table, we come up the formula of
the future value
𝑭 = (𝑷)(𝟏 + 𝒓)𝒕
The given interest rate in the table is compounded annually which means that
the computing period is per year, thus the formula above is the future value of
an interest compounded annually.
The given interest rate in a compound interest environment is always an annual
interest rate but it can be compounded more than once a year

Interest can be compounded

annually (every year) quarterly (every 3 months)
semiannually (every 6 months) monthly (every month)

Examples:
Find the interest rate of 12% compounded:

annually semiannually
1 year
1 year
6 months 6 months
12%
6% 6%

The interest rate per compounding There is a 6% rate per compounding

period remains the same period.
which is 12%.

13
 quarterly monthly

1 year 1 year
3 mo 3 mo 3 mo 3 mo
1 1 1 1 1 1 1 1 1 1 1 1
4% 4% 4% 4% mo mo mo mo mo mo mo mo mo mo mo mo
1 1 1 1 1 1 1 1 1 1 1 1
% % % % % % % % % % % %

There is a 4% rate per compounding There is a 1% rate per compounding period.

period.

There are situations where interest is compounded more than once a year. In
𝑟
that case, we need to distribute the annual interest rate or divide r by n ( ) to get
𝑛

the interest rate per compounding period as shown above, thus the final formula
for getting maturity or future value will be…

Future Value or Maturity Value

𝑟 𝑛𝑡
𝐹 = (𝑃 ) (1 + )
𝑛
Where :

F is the maturity or Future Value

P is the Principal Amount
r is the annual interest rate
n is the number of times the interest is compounded in a year
t is the number of years or the term in years

We can also express future value as F = P + I, then the formula of Compound

Interest will be…

Compound Interest
𝐼 =𝐹−𝑃
Where :

I is the interest
F is the maturity or Future Value
P is the Principal Amount

• In compound interest environment, the future or maturity value will be

computed first before the compound interest.
• You need to remember that when the problem gives a term not in years, you
need to convert it first to years before you input it in the formula.

14
EXAMPLES: Round all answers to nearest hundredths.
1) Find the future value of ₱ 2,000 after 5 years at 3% interest rate compounded
annually.
Given:
P = 2,000 r = 0.03 t= 5 n = 1 (annual compound interest)
Find: F
Solution:
𝑟 𝑛𝑡
𝐹 = (𝑃) (1 + )
𝑛
0.03 (1)(5)
𝐹 = (2,000) (1 + )
1
𝐹 = (2,000)(1 + 0.03)(5)
𝐹 = (2,000)(1.03)(5)
𝑭 = 𝟐, 𝟑𝟏𝟖. 𝟓𝟓
Therefore, the future value after 5 years is ₱ 2,318.55.

2) Find the future value and interest of ₱ 18,500 after 3 years at 5% interest rate
compounded monthly.
Given:
P = 18,500 r = 0.05 t=3 n = 12 (compounded monthly)
Find: a) F b) I
a) Future Value
Solution:
𝑟 𝑛𝑡
𝐹 = (𝑃) (1 + )
𝑛
0.05 (12)(3)
𝐹 = (18,500) (1 + )
12
𝐹 = (18,500)(1 + 0.00416667)(36)

𝐹 = (18,500)(1.00416667)(36)
𝑭 = 𝟐𝟏, 𝟒𝟖𝟕. 𝟐𝟒

Therefore, the future value after 3 years is ₱ 21,487.24.

b) Interest
Given
P = 18,500 F= 21,487.236

Solution:

𝐼 = 𝐹−𝑃
𝐼 = 21,487.236 − 18,500
𝑰 = 𝟐, 𝟗𝟖𝟕. 𝟐𝟒
Therefore, the interest is ₱ 2,987.24

15
 What’s More

Activity 1.3: NOW IT’S YOUR TURN!

Instructions: Write your answers on separate sheet of paper. Round off answers to
hundredths place.

A. Find the future value of the following:

1) ₱ 10,000.00 at 2 % interest compounded annually for 6 years
2) ₱ 850.00 at 4% interest compounded semiannually for 3 years and 6 months
B. Copy the table and give the future value and compound interest.

Principal
Interest Rate (r) Time (t) Future Value (F) Interest (I)
Amt (P)
₱ 8500 5% 3 yr
₱ 22,550 3 % compounded monthly 1.75 yr
2 % compounded
₱ 6,300 9 months
quarterly

What I Have Learned

FUTURE VALUE OR MATURITY VALUE

𝒓 𝒏𝒕
𝑭 = (𝑷) (𝟏 + )
𝒏
COMPOUND INTEREST FORMULA

𝑰=𝑭−𝑷

Lesson Finding Interest Rate, Time, and Principal Amount

in a Simple and Compound Interest Environment
4

What I Need To Know

At the end of this lesson, you are expected to:

o Derive the formula of interest rate, time and principal amount in a simple
and compound interest environment
o Solve for interest rate, time and principal amount in simple and compound
interest environment

16
 What’s In

Recall the formula of the following:

1) Simple interest 𝐼 =𝑃∙𝑟∙𝑛∙𝑡

2) Future value in a simple interest environment 𝐹 =𝑃+𝐼
or 𝐹 = 𝑃 ( 1 + 𝑟 ∙ 𝑛 ∙ 𝑡 )
𝑟 𝑛𝑡
3) Future value in a compound interest environment 𝐹 = (𝑃) (1 + 𝑛)
4) Compound Interest 𝐼 = 𝐹−𝑃

What’s New

Derive the formula of interest rate, time and principal amount in a simple and
compound interest environment using the major formulas.

What is It

Related formula of simple interest can be derived using properties in algebra

such as addition property of equality, multiplication property of
equality and symmetric property of equality.

Simple Interest Environment

Interest Rate (r) Time Principal Amount (P)

𝐼 =𝑃∙𝑟∙𝑛∙𝑡 𝐼 =𝑃∙𝑟∙𝑛∙𝑡 • 𝐼 =𝑃∙𝑟∙𝑛∙𝑡

𝐼 𝑃 ∙ 𝑟 ∙ 𝑛 ∙ 𝑡 [1] 𝐼 𝑃∙𝑟∙𝑛∙𝑡 𝐼 𝑃∙𝑟∙𝑛∙𝑡 [1]

= = [1] =
𝑃∙𝑛∙𝑡 𝑃∙𝑛∙𝑡 𝑃∙𝑟∙𝑛 𝑃∙𝑟∙𝑛 𝑟∙𝑛∙𝑡 𝑟∙𝑛∙𝑡
𝐼 𝐼 𝐼
=𝑟 =𝑡 =𝑃
𝑃∙𝑛∙𝑡 𝑃∙𝑟∙𝑛 𝑟∙𝑛∙𝑡

𝐼 𝐼 𝐼
𝑟= [2] 𝑡= [2] 𝑃= [2]
𝑃∙𝑛∙𝑡 𝑃∙𝑟∙𝑛 𝑟∙𝑛∙𝑡

[1] Multiplication Property [1] Multiplication Property of

of Equality Equality [1] Multiplication Property of Equality
[2] Symmetric Property of [2] Symmetric Property of [2] Symmetric Property of Equality
Equality Equality

17
 Continuation of Principal Amount

• 𝐹 =𝑃+𝐼 [1]
𝐹−𝐼 =𝑃

𝑃=𝐹−𝐼 [2]

Where: [1] Addition Property of Equality

[2] Symmetric Property of Equality

I is the interest
r is the interest rate • 𝐹 =𝑃(1+𝑟∙𝑛∙𝑡)
P is the principal amount or present value
F is the maturity or Future Value 𝐹 𝑃 ( 1 + 𝑟 ∙ 𝑛 ∙ 𝑡 ) [1]
n is the number of times the interest is =
(1+𝑟∙𝑛∙𝑡) (1+𝑟∙𝑛∙𝑡)
computed in a year
t is the number of years or the term in years 𝐹
=𝑃
(1+𝑟∙𝑛∙𝑡)

𝐹
𝑃=
(1+𝑟∙𝑛∙𝑡)

[1] Multiplication Property of Equality

[2] Symmetric Property of Equality

EXAMPLES: Round off answers to nearest hundredths.

1) Find the time in years of ₱ 5,600.00 earning an interest of ₱ 560 at 4% simple
interest rate. Round off answers to nearest hundredths.

Given:
P = 5,600 I = 560 r = 0.04 n=1
Find: t
Solution:
𝐼
𝑡=
𝑃∙𝑟∙𝑛

560
𝑡=
(5,600)(0.04)(1)

𝒕 = 𝟐. 𝟓 𝒚𝒆𝒂𝒓𝒔

Therefore, the interest can be earned after 2.5 years.

2) Find the principal amount that will accumulate to ₱ 10,000 at 3% simple

interest per quarter after 5 years

Given:
F = 10,000 t= 5 yr r = 0.03 n = 4 (per quarter)

Find: P

18
Solution:
F
P=
( 1+r∙n∙t )

10,000
P=
( 1+(0.03)(4)(5) )

10,000
P=
( 1+0.6 )

10,000
P= = 𝟔, 𝟐𝟓𝟎
( 1.6 )

Therefore, the money from the start or the principal amount is ₱ 6, 250.00.

Related formula of compound interest can be derived using logarithmic

properties, square root properties and properties in algebra such as
addition property of equality, multiplication property of equality and
symmetric property of equality.

Compound Interest Environment

Principal Amount (P) Time (t) Interest Rate (r)

𝑟 𝑛𝑡 𝑟 𝑛𝑡 𝑟 𝑛𝑡
• 𝐹 = (𝑃) (1 + ) 𝐹 = (𝑃) (1 + ) 𝐹 = (𝑃) (1 + )
𝑛 𝑛 𝑛

𝑟 𝑛𝑡 𝑟 𝑛𝑡 𝑟 𝑛𝑡
𝐹 (𝑃) (1 + ) (𝑃) (1 + ) (𝑃) (1 + )
𝑛 [1] 𝑭 𝑛 𝑭 𝑛 [1]
= = [1] =
𝑟 𝑛𝑡 𝑟 𝑛𝑡 𝑃 𝑃 𝑃 𝑃
(1 + ) (1 + )
𝑛 𝑛
𝑭 𝑟 𝑛𝑡 𝑭 𝑟 𝑛𝑡
𝐹 = (1 + ) = (1 + )
= 𝑃 𝑃 𝑛 𝑃 𝑛
𝑟 𝑛𝑡
(1 + )
𝑛
𝑛𝑡
𝑭 𝑟 𝑛 𝑡 𝑛𝑡𝐹 𝑟
√ = √(1 + )
𝑛𝑡
= [(1 + ) ] [2] 𝑃 𝑛
𝑃 𝑛
𝐹 [2]
𝑃= 𝑟 𝑛𝑡 [2] 𝑭
(1+𝑛) log 𝑟 𝑛 =𝑡 [3] 𝑛𝑡𝐹 𝑟
(1+𝑛) 𝑃 √ =1+
𝑃 𝑛
𝑭
[1] Multiplication Property of Equality 𝑡 = log 𝑟 𝑛 [4] [3]
[2] Symmetric Property of Equality (1+𝑛) 𝑃
𝑛𝑡𝐹 𝑟
√ −1 =
𝑃 𝑛
• 𝐼 =𝐹−𝑃 Use Change of Base
Formula
𝐹−𝑃=𝐼 [1] 𝑛𝑡 𝐹 𝑟
𝐹 𝑛 ∙ √ −1 =𝑛∙ [4]
log 𝑃 𝑃 𝑛
[2] [5]
𝐹−𝐼 =𝑃 𝑡=
𝑟 𝑛
log (1 + )
𝑛 𝑛𝑡 𝐹
𝑃 =𝐹−𝐼 [3] 𝑛 ( √ − 1) = 𝑟
𝑃

19
 Continuation of Principal Continuation of time Continuation of Interest
Amount Rate

[1] Symmetric Property of Equality [1] Multiplication Property of 𝑛𝑡 𝐹

[2] Addition Property of Equality Equality 𝑟= 𝑛 ( √ − 1) [5]
[3] Symmetric Property of Equality [2] Laws of Exponent: Power of 𝑃
a Product Rule
[3] Changing Exponential Form
to Logarithmic Form [1] Multiplication Property of
[4] Symmetric Property of Equality
Equality [2] Apply (nt)th root both sides to
[5] Applying Change of Base cancel the (nt)th power of the
Formula right side
[3] Addition Property of Equality
[4] Multiplication Property of
Equality
[5] Symmetric Property of
Equality
Where :

I is the interest n is the number of times the interest is compounded in a year

r is the annual interest rate P is the Principal Amount
F is the maturity or Future Value t is the number of years or the term in years

EXAMPLES: Round of answers to nearest hundredths

1) Find the principal amount that will accumulate to ₱ 95,894.01 at 1.4% interest
rate compounded quarterly after 3 years.
Given: F = 95,894.01 t= 3 yr r = 0.014 n = 4 (quarterly)
Find: P
Solution:
𝐹
𝑃 = 𝑟 𝑛𝑡
(1+ )
𝑛

95,894.01
𝑃= 0.014 (4)(3)
(1+ )
4

95,894.01
𝑃 = (1.0035)(12)

P = 91,956.61

Therefore, the principal amount is ₱ 91,956.61.

2) Find the interest rate of ₱ 15,000.00 earning a compound interest of ₱ 1,560 after
3.5 yr.
Given:
P = 15,000 I = 1, 560 t =3.5 yr n=1

Find: r
Solution:
Solve first the future value
𝐹 = 𝑃 + 𝐼 = 15,000 + 1,560 = 16,560

20
 𝑛𝑡 𝐹
𝑟 = 𝑛 ( √ − 1)
𝑃

(1)(3.5) 16,560
𝑟= 1( √15,000 − 1)

3.5
𝑟 = √1.104 − 1

𝒓 = 𝟎. 𝟎𝟐𝟖𝟔 = 𝟐. 𝟖𝟔%

Therefore, the interest rate is 2.86%

What’s More

Activity 1.4: NOW IT’S YOUR TURN!

Instructions: Write your answers on a separate sheet of paper.

A.) Find the unknown part of the interest table from the answer box. Place the letter
of your answer and form a word that will answer the given riddle.
1) Simple Interest Environment
Principal Interest Rate Time Simple Interest Future Value
(I)
(P) (r) (t) (F)
₱ 6,000 2% I ₱ 750
₱ 9000 V 3 yr ₱ 1,800
R 1.5% per 6 months 4 yr ₱ 30,000
E 3% per quarter 2 yr ₱ 2,500

RIDDLE: It has mouth but cannot eat; moves but has no legs; and has a bank but
cannot put money in it.

Answer
Box 26,785.71 6.25 6.67 10,416.67 26,785.71

2) Compound Interest Environment

Principal Interest Rate Time Future Value Compound
(P) (r) (t) (F) Interest
(I)
O 8 % compounded monthly 5 yr ₱ 16,700
₱ 25,000 K 3 yr ₱ 50,000
₱ 22,500 3% C ₱ 30,000
L 2.5% compounded quarterly 9 months ₱ 9,850

RIDDLE: I run but I cannot walk, I sometimes sing but never talk, I lack arms but I
have hands, I lack a head but I have a face.

Answer
Box 9.73 9667.60 11,209.21 9.73 25.99

21
B) Find the following.

1) Find the interest rate of ₱ 840.50 earning a simple interest of ₱ 80 for 2 yr.
2) Find the principal amount that will accumulate to ₱ 55,780 at 4% interest
rate compounded annually for 6 years
3) How long will it take ₱ 3,000 pesos to accumulate to ₱ 3,450 in a bank savings
account at 0.5% compounded quarterly?

What I Need To Remember

SIMPLE INTEREST Formula

• Simple Interest 𝐼 = 𝑃∙𝑟∙𝑛∙𝑡

• Future Value 𝐹 =𝑃+𝐼
𝐼
• Interest Rate 𝑟 = 𝑃∙𝑛∙𝑡
𝐼
• Time 𝑡= 𝑃∙𝑟∙𝑛
𝐹 𝐼
• Principal Amount 𝑃 = 𝐹 − 𝐼 or P = ( 1+𝑟∙𝑛∙𝑡 ) or 𝑃 = 𝑟∙𝑛∙𝑡

COMPOUND INTEREST Formula

𝑟 𝑛𝑡
• Future Value 𝐹 = (𝑃) (1 + )
𝑛
• Compound Interest 𝐼 =𝐹−𝑃
•
𝑛𝑡 𝐹
Interest Rate 𝑟 = 𝑛 ( √𝑃 − 1)
𝐹
log
• Time 𝑡= 𝑃
𝑟 𝑛
log(1+ )
𝑛

22
 Lesson Solving Word Problems on
5 Simple and Compound Interest

What I Need To Know

At the end of this lesson, you are expected to:

• solve word problems on simple and compound interest.

What’s In

Copy and complete this table on a separate sheet of paper.

FORMULA
No UNKNOWN Simple Interest Compound Interest
Environment Environment
1 INTEREST
2 FUTURE OR MATURITY
VALUE
3 PRINCIPAL AMOUNT
4 INTEREST RATE
5 TIME

What’s New

Arrange the following steps of solving word problems in proper sequence. Choose the
letter of the correct answer and write them on a separate sheet of paper.
Step 1: _______
A. Choose a formula to be used D. Read the problem
in solving the unknown. carefully. Step 2: _______

Step 3: _______
B. Give a conclusion. E. Figure out what is the
unknown in the problem.
Step 4: _______

C. Identify and list the Step 5: _______

given. F. Solve for the unknown.
Step 6: _______

23
 What Is It

Steps in Solving Word Problems

1) Read the problem carefully.
2) Identify and list the given.
3) Figure out what is the unknown in the problem.
4) Choose a type of interest being applied in the problem.
5) Choose a formula to be used in solving the unknown.
6) Solve for the unknown.
7) Give conclusion.

EXAMPLES: Round your answers to hundredths place.

1) Inday borrowed ₱ 25,000 at 10% annual simple interest rate. How much should
she pay after 3 years?

Given : P = 25,000 r = 0.10

n =1(annual) t=3
Find :F
Type of Interest : Simple Interest
Formula : 𝐹 = 𝑃(1+𝑟∙𝑛∙𝑡)

Solution:

𝐹 =𝑃(1+𝑟∙𝑛∙𝑡)
𝐹 = 25 000 ( 1 + (0.10)(1)(3) )

𝐹 = 25 000 ( 1 + 0.3 )

𝐹 = 25 000 ( 1.03 )
𝑭 = 𝟑𝟐, 𝟓𝟎𝟎
Therefore, Inday should pay ₱ 32,500 after 3 years.

2) Jose is investing an amount at 1.5% simple interest per month for 4 years. If he
intends to have ₱ 48,200.00 at the end of the term, what must be his principal
amount?

Given : r = 0.015 n =12(per month)

t=4 F = 48,200
Find :P
Type of Interest : Simple Interest
𝑭
Formula :P=
( 1+𝑟∙𝑛∙𝑡 )

24
 Solution:
𝑭
P = ( 1+𝑟∙𝑛∙𝑡 )

48,200
P = ( 1+(0.015)(12)(4) )
48,200
P = ( 1+0.72 )
48,200
P = ( 1.72 )

P = 𝟐𝟖, 𝟎𝟐𝟑. 𝟐𝟔

Therefore, the principal amount of Jose must be ₱ 28,023.26.

3) Suppose your mother deposited in your bank account ₱ 8,000 when you were still
5 yr old and did not get the amount until you reach 20 yr old. After 15 years, it
generated a simple interest of ₱ 1,511.40. What is the interest rate of the bank?

Given : P = 8,000 t = 15 I = 1,511.40

n=1 (annual interest for there is no computing period
mentioned)
Find :r
Type of Interest : Simple Interest
𝐼
Formula :𝑟=
𝑃∙𝑛∙𝑡

Solution:
𝐼
𝑟=
𝑃∙𝑛∙𝑡
1,511.40
𝑟=
(8000)(1)(15)
1,511.40
𝑟=
120000

𝒓 = 𝟎. 𝟎𝟏𝟐𝟓𝟗𝟓 = 𝟏. 𝟐𝟔%

The interest rate of the bank is 1.26%.

4) How long will it take ₱4,000 pesos to accumulate to ₱4,500 in a bank savings
account at 1% compounded monthly?

Given : P = 4,000 F = 4,500

r = 0.01 n=12(monthly)
Find :t
Type of Interest : Compound Interest
𝐹
log
Formula :𝑡= 𝑃
𝑟 𝑛
log(1+ )
𝑛

25
 Solution:
𝐹
log
𝑃
𝑡= 𝑟 𝑛
log(1+ )
𝑛
4500
log
4000
𝑡= 0.01 12
log(1+ )
12
log 1.125
𝑡= log 1.010045961

𝒕 = 11.78

Therefore, it will take 11.78 years to accumulate to ₱4,500.

5) Given a principal of ₱ 5,000, which of the following options will yield greater
compound interest after 4 years and 6 months:

OPTION A: Earn an annual interest rate of 2% at the end of the year, or

OPTION B: Earn an annual interest rate of 2% in two portions—
1% after 6 months, and 1% after another 6 months?

Option A

Given : P = 5000 t = 4 years and 6 months = 4.5 yr

n = 1( end of the year) r = 0.02
Find :I
Type of Interest : Compound Interest
𝑟 𝑛𝑡
Formula : 𝐹 = (𝑃) (1 + ) and 𝐼 = 𝐹 − 𝑃
𝑛

Solution:

Solve first Future Value.

𝑟 𝑛𝑡
𝐹 = (𝑃) (1 + )
𝑛

0.02 (1)(4.5)
𝐹 = (5,000) (1 + )
1

𝐹 = (5,000)(1 + 0.02)(1)(4.5)

𝐹 = (5,000)(1.02)4.5

𝐹 = 5,466.01

Since the future value is solved, interest can now be solved.

𝐼 =𝐹−𝑃
𝐼 = 5,466.01 − 5,000
𝑰 = 𝟒𝟔𝟔. 𝟎𝟏

Therefore, option A will generate a compound interest of ₱ 466.01

26
 Option B
Given : P = 5000 t = 4 years and 6 months = 4.5 yr
n = 2(two portions) r = 0.02
Find :I
Type of Interest : Compound Interest
𝑟 𝑛𝑡
Formula : 𝐹 = (𝑃) (1 + ) and 𝐼 = 𝐹 − 𝑃
𝑛

Solution:

• Solve first future value

𝑟 𝑛𝑡
𝐹 = (𝑃) (1 + )
𝑛

0.02 (2)(4.5)
𝐹 = (5,000) (1 + )
2

𝐹 = (5,000)(1 + 0.01)(2)(4.5)

𝐹 = (5,000)(1.01)9

𝐹 = 5,468.43

• Since the future value is solved, find the interest.

𝐼 =𝐹−𝑃 Option A
𝐼 = 5,468.43 − 5,000 Option B
𝑰 = 𝟒𝟔𝟖. 𝟒𝟑

Therefore, option B will generate a compound interest of ₱ 468.43.

Option B yield greater interest.

What’s More

Activity 1.5: NOW IT’S YOUR TURN!

Instructions: Solve the given problems and show solutions on a separate sheet of
paper. Round your answers to nearest hundredths.
1) Ramon invested ₱ 25,000 at 16% simple interest for 6 years.
a) How much interest will be earned?
b) What is the future value of the investment at the end of 6 years?
2) You deposited ₱ 64,600 in a savings account which pays 8% interest compounded
semi-annually. How much will you get after 4 years?
3) Mr. Contis aims to have his investment grow to ₱500,000 in 4 years. How much
should he invest in an account that pays 5% compounded annually?
4) Josie invested an amount of ₱100,000 where she obtained an interest of ₱16,000
at the end of 2 ½ years. At what rate compounded semiannually was it invested?

27
5) Five years from now you want to start a business. In order to do that you have
estimated to need an initial capital of ₱ 100,000. You can deposit an amount today
in one of the following accounts, which account will you choose?

Account 1 offers 1.4 % annual interest rate compounded quarterly

Account 2 offers 1.1% annual interest rate compounded monthly

What I Have Learned

Steps in Solving Word Problems

1) Read the problem carefully.

2) Identify and list the given.
3) Figure out what is the unknown in the problem.
4) Identify the type of interest being referred in the problem.
5) Choose a formula to be used in solving the unknown.
6) Solve for the unknown and always put unit in your answer.
7) Give conclusion.

What I Can Do

On a separate sheet of paper, answer the given question in at most 5 sentences.

(15pts)

1) How will the lessons of simple and compound interest help you in the
future?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________

Rubrics:
5 pts 3 pts 1 pt
Response rephrases the Response declares Writer’s main idea or
question while declaring writer’s main idea or opinion is not clear
Main Idea or Opinion
the writer’s main idea or opinion
opinion
Writer shares at least 3 Writer shares 1 or 2 Writer shares little or
clear examples and examples and evidence no evidence and
Details and Evidence
evidence to support to support their idea or examples to support
their idea or opinion opinion their answer
Student’s response has Student’s response Response needs
a clear beginning, flows, but the beginning, stronger transitions.
Organization, Grammar, middle and end. middle or end is not Grammar, usage, and
Usage and Punctuation Grammar, usage and clear. Grammar, usage, punctuation make the
punctuation makes the and punctuation slows text difficult to read
writing readable. readability

28
 Assessment (Post Test)

Instructions: Choose the letter of the correct answer. Write your answer on
a separate sheet of paper.

1. Which of the following situations does NOT involve interest?

A. borrowing money from the bank
B. investing money in an investing firm
C. buying goods from wet market
D. pawning jewelry in pawnshops

2. What do you call the amount after t years that the lender receives from the
borrower on the maturity date?
A. future value C. present value
B. interest D. principal amount

For 3-4, Refer to this situation

Rosa, who is working in a bank offering an annual interest rate of 3%, is explaining
to a client the maturity value of his Php 50,000 after 2 years through an illustration.
She is thinking of the following illustrations:

Term Interest
A. or
Principal (P) Interest Amount After t years
Time Rate (r)
(t) Solution Answer (Future Value)
1 50,000 0.03 (50,000)(0.03) 1500 50,000 + 1500 = 51,500
2 100,000 0.03 (100,000)(0.03) 3000 51,500 + 3,000 = 54,500

Term Interest
B. or Interest
Time
Principal (P) Amount After t years
Rate (r) Solution Answer
(t) (Future Value)
1 50,000 0.03 (50,000)(0.03) 1500 50,000 +1500 = 51,500
2 50,000 0.03 (50,000)(0.03) 1500 51,500 + 1500 = 53,000

Term Interest
C. or
Principal (P) Interest Amount After t years
Time Rate (r)
(t) Solution Answer (Future Value)
1 50,000 0.03 (50,000)(0.03) 1500 50,000 +1500 = 51,500
2 51,500 0.03 (51,000)(0.03) 1530 51,500 + 1530 = 53,030

3. What illustration must Rosa present if the bank offers compound interest?

4. What illustration must Rosa present if the bank offers simple interest?

5. You plan to invest money that earns interest in a bank. If you are a wise investor,
which bank and interest rate compounded annually will you choose?
A. Bank A- 2% C. Bank C-4%
B. Bank B- 3% D. Bank D- 5%

29
6. The principal amount is compounded semiannually, how many times will its
interest be compounded in a year?
A. 2 B. 4 C. 6 D. 12

7. What is the formula to be used in finding the time (t) of simple interest problem?
𝐹
𝐼 𝐹 log 𝑃 𝑟 𝑛𝑡
𝐴. B. C. 𝑟 𝑛
D. (𝑃) (1 + )
𝑃∙𝑟∙𝑛 ( 1+𝑟∙𝑛∙𝑡 ) log(1+𝑛) 𝑛

8. Find the simple interest on a loan of ₱ 65,000 if the loan is given at a rate of 0.5
% per quarter and is due in 3 years.
A. ₱ 3,900 B. ₱ 5,800 C. ₱ 8,900 D. ₱ 19,000

9. Tessie lent Victor ₱ 4,500 at 6% simple interest for 2 years. How much should
Victor have to pay back the loan with interest?
A. ₱ 540 B. ₱ 1200 C. ₱ 3070 D. ₱ 5040

10. Elvince invested ₱ 10,000 and gain a simple interest of ₱ 2,650 in 4 yr. What
was the annual interest rate granted to the investment?
A. 0.0662% B. 0.0541% C. 5.41% D. 6.63%

11. What is the formula to be used in finding the interest rate (r) of compound interest
problem?
𝐹
𝐼 𝐹 log 𝑃 𝑛𝑡 𝐹
𝐴. B. C. 𝑟 𝑛
D. 𝑛 ( √ − 1)
𝑃∙𝑛∙𝑡 ( 1+𝑟∙𝑛∙𝑡 ) log(1+𝑛) 𝑃

12. Find the future value of Php 65,400 after 3.5 years at 2% interest rate
compounded semiannually.
A. ₱ 4,717.65
B. ₱ 9,156. 35
C. ₱ 70,117.65
D. ₱ 74,556.35

13. Find the interest of Php 8,360 after 9 months at 5 % interest rate compounded
monthly.
A. ₱ 48.78
B. ₱ 318.78
C. ₱ 8678.78
D. ₱ 12,122.78

14. Pearl is planning to invest P20,000. At what rate compounded semi-annually will
accumulate her money to P25,000 in 3 years?
A. 0.065% B. 0.076% C. 6.45% D. 7.57%

15. How long will it take P1,000 to earn P300 if the interest is 12% compounded
semi-annually?
A. 2.25 yr B. 3.75 yr C. 4.50 yr D. 5.25 yr

30
References

Text Book
Dimasuay, Lynie, et al. General Mathematics (Quezon City, Philippines: C &
E Publishing, Inc., 2016)
Lopez-Mariano, Norma D. Business Mathematics (Manila City, Philippines:
Rex Book Store, Inc., 2016)
Oronce, Orlando, General Mathematics (Manila City, Philippines: Rex Book
Store, Inc., 2016)

Images
Images used in this module and all taken from the Elements of Canva.com.

PDF
Verzosa, Debbie Marie B. et al. (2016). General Mathematics Learner's Material [PDF
File]. Pasig City, Philippines: Department of Education .pp 135-168. Retrieved from
https://www.academia.edu/36815004/General_Mathematics_Learners_Material
_Department_of_Education_Republic_of_the_Philippines

Websites
Neely K. Using Rubrics to Grade Open Ended Questions (2019). Retrieved
from https://www.studiesweekly.com/blog/using-rubrics/ on November
4,2020
Simple and Compound Interest (n.d), retrieved from
https://www.nuffieldfoundation.org/sites/default/files/files/FSMA%20
Simple%20and%20compound%20interest%20student(1).pdf on July 8,
2020
Simple and Compound Interest PDF (n.d), retrieved from
https://examsdaily.in/simple-and-compound-interest-pdf on July 8,
2020

Congratulations!
You are now ready for the next module. Always remember the following:

1. Make sure every answer sheet has your

o Name
o Grade and Section
o Title of the Activity or Activity No.
2. Follow the date of submission as agreed with your teacher.
3. Keep the modules with you.
4. Return them at the end of the school year.

32