BASIC BUSINESS

MATHEMATICS
Basic Business Mathematics

• Mathematics has many application in real-life.

One of the most useful applications of
mathematics is in business. In this chapter,
we shall learn some common applications of
mathematics in business. We shall discuss
two common types of ineterest : simple and
compound interests. We shall discuss also
annuities and amortizations.
 TERMS TO REMEMBER
• SIMPLE INTEREST
• COMPOUND INTEREST
• PRESENT VALUE
• MATURITY VALUE
• SIMPLE ANNUITIES
• GENERAL ANNUITIES
• STOCKS
• BONDS
• AMORTIZATIONS
 EXPLORING SIMPLE INTEREST
• Money invested or borrowed earn ineterest. In this
lesson, we shall learn how to compute simple interests
and solve related problems.
• Before we go through this lesson, do the next activity to
prepare you for this lesson.
• Change the following numbers to the indicated form.
Percent Decimal Fraction
45%
6.5%
0.034
3/5
6.2
 ANALYZE AND EXPLORE
The concept of computing interest was already being
practiced since the ancient Babylonian
mathematicians created tables of numbers. They
used tables to determine how long it would take to
double one's money at a particular interest rate.
In this lesson, we shall learn how to calculatee
simple interests, Although most financial
transactions use compound interest, simple interest
is still used in many short term transactions.
• The sum of the money paid for the use of money is
called interest . The interest earned on a deposit of
charged againts a loan depends on three factors.
• 1. The rate of interest(r) which is given by the bank
or charged by the lender.
• 2. The lenght of time(t) for which money is
deposited borrowed.
• 3. The sum of money deposited or borrowed is
called the Principal(p)
• When money is deposited or borrowed, the total amount
of money at the end of the transaction period is called
final amount. The final amount is equal to the sum of the
principal and the interest. In symbol, we write F=P+I
• where F= final amount
P= principal amount
I = interest
When interest on a deposit or loan is computed once for the
full term of the loan. It is called simple interest.
• The simple interest(I) is computed by multiplying the
principal (P) by the rate of interest(r) and the length of
time(t) of the deposit or loan. In symbol, we write I=Prt.
Based on this formula, other formulas may be derrived as
given below.
r=I/Pt t=I/Pr P=I/rt
Since I = Prt and F = P + I, we have
F = P+I
F = P+Prt
F = P(1+rt)
• The interest rate and the time always
correspond accordingly. Thus, they must be
both expressed monthly, quarterly, semi-
annually or annually.Unless otherwise
specified, all simple interest rates are
expressed as annual rates. Therefore, the
time of the loan or investment must always be
expressed in years.
• Example 1
• Yuan deposited Php 5,000.00 in a bank
paying 9% simple interest for 3 years.
How much would he have in his account
at the end of three years, assuming that
no withdrawal was made.
• Step 1. Identify the given imformation.
• P= 5, 000.00 r= 9%=0.09 t= 3 years

• Step 2. Identify what is asked in the problem and the

formula to be used.
• We are asked to find the final amount F. The formula to be
is F= P(1+rt)
• Step 3. Substitute the given values and compute the
value o the unknown.
•F= P(1+rt)
• = 5,000.00[1+(0.09)(3) = Php 6,
350.00
•So, the amount of money after 3
years is Php 6, 350.00
 EXAMPLE 2
Brando Maribeles borrowed Php 15,000.00
from a bank charging 7% simple interest
with an agreement that he would pay the
principal and the interest at the end of the
term. If he paid Php 17, 100.00 at the end
of the term, for how long did he used the
money?
Step1. Identify the given information.
P=15,000.00 F=17, 100.00 r=7%=0.07
Step 2. Identify what is asked in
the problem and the fomula to
be usedd.
We are asked to find
the time (t). The formula to be
used is t=I/Pr.
 Step3. Substitute the given values and compute the
value of the uknown.
We will solve first for I using the formula
I=F-P Solve for time(t)
I=17,100.00-15,000.00 t=I/pr
I=2, 100.00 t=2,100.00/(15,000)(0.07)
t=2
So, the money was used for 2 years
 Example 3
• Jonathan invested Php 75,000.00 in the stock market
which guaranteed an interest of 11, 500.00 after one and
a half years. At what rate would his investment earn?
• Step 1. Identify the given information.
• P= 75,000.00 I= 11, 250.00 t=1.5 years
• Step 2. identify what is asked in the problem and the
formula to be used. We asked to find the interest rate(r).
The formula to be used is
• r=I/Pt
• Step 3. Substitute the given values and
compute then value of the unknown.
• r=I/Pt
• = 11,250/75,000(1.5)
• = 0.10 = 10%
• So, the interest rate is 10%
 Example 4
• Julius De Mesa paid an interest of Php 5,000 on a three
year loan at 8% simple interest
• a. What was the original loan?
• b. How much did he pay at the end of three years?
• Step 1. Identify the given informations.
I=5,000.00 t=3 years r=8%=0.08
Step 2. Identify what is asked in the problem and the
formula to be used. We asked to find the principal P. The
formula to be used is P=I/rt
• Step 3. Substitute the given values and compute the
value of the unknown.
• P=I/rt
• = 5,000.00/(0.08(3)=20 833.33
• = So, the original amount of the loan is Php 20,833.33
• Next, we compute the total amount paid for the loan.
• F=P+I
• = 20,833.33 + 5,000.00 = 25, 833.33
 Example No. 5
• If a person borrowed Php 35,000.00 from a bank charging
12% simple interest , how much would he pay at the end
of 18 months?
• Step 1. Identify the given information.
P=35,000.00 r=12% = 0.12 t=18 months or 1.5 years
Step 2. Identify what is asked in the problem andd the
formula to be used. We asked to find the final amount (F).
The formula to be used is
F=P(1+rt).
• Step 3. Substitute
the given values and
compute the value of
the uknown.
• F=P(1+rt)
=
35,000[1+(0.12)(1.5)
= 41,300