Priming Activity

• A game will be played as team

compete with each other.
• Each member will be assigned to a
corresponding number.
• A number will be called and he/she
will be the contestant
. for the team.
• Questions will be flashed with the
corresponding time limit.
• Each question will be given a
corresponding point.
Priming Activity

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Priming Activity

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Priming Activity

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Priming Activity

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Priming Activity

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Objectives

After this session, you are expected to:

1.analyze problems involving interests -

simple and compounded.

.
2. solve problems involving interests -
simple and compounded.
Interest

income derived from invested

capital
money paid as rental for the use
.
of money

DEPARTMENT OF EDUCATION
Interest

Interest (I) - a fixed rated

proportion as the rate of interest
for any specified time unit.
Interest Rate (r) - ratio of the
interest earned in one time unit
to the principal..
Principal (P) - refers to the capital
originally invested in a business
transaction.
DEPARTMENT OF EDUCATION
Interest

Amount / Full Amount (F) - the

sum of the Principal (P) and the
Interest (I) due at any time after
the investment of the Principal (P).
Time (t) - period of
. coverage of the
transaction. Unless otherwise
specified, the time unit will be one
year.
DEPARTMENT OF EDUCATION
Interest

I = Prt
where, I = interest
P = Principal or original
capital invested
.

r = rate of interest (%)

t = time

DEPARTMENT OF EDUCATION
Interest

I = Prt
.

DEPARTMENT OF EDUCATION
Interest
Sample Problem.
1. Find the interest and the full
amount on P3,000 at 5% interest
I = P300
for two years. F = P3,300

2. Find the principal

. value P and
full amount F if the investment
earns P200 interest in 18 months
at the rate of 8%. P = P1,666.67
F = P1,866.67
DEPARTMENT OF EDUCATION
Interest
Sample Problem.
3. If P500 is the interest earned of
P8,000 which was invested for 16
months, how much is the rate of
interest? .
r = 4.68%

4. How long will it take to

accumulate P5,000 to P7,000 if
the interest rate is 6%? t = 6.67 years

DEPARTMENT OF EDUCATION
 ACTIVITY 1
1. You get a student loan from the New Mexico Educational Assistance
Foundation to pay for your educational expenses this year. Find the interest
on the loan if you borrowed $2,000 at 8% for 1 year.
2. You are starting your own small business in Albuquerque. You borrow
$10,000 from the bank at a 9% rate for 5 years. Find the interest you will
pay on this loan.
3.  If Michael invests $2000 in the bank at a rate of 5.5% for 6 years how muc
h  interest will he make?
4. Taylor has just won $4,250 from the 50/50 at the Sea Dog's game and decid
es to 
invest all of it.  If he makes $1275 with a 5% interest rate, how long must h
e have  had the money invested?
5.  Morgan has an investment worth $130,000 dollars after 20 years.  If his ori
ginal  investment was for $50,000 what must the interest rate have been?
 ACTIVITY 2
1. Ben deposited $6,500 in a simple interest account that pays 2.8% interest
annually. If Ben leaves the money in the account for 12 years, how much
interest will he earn?
2. Derek deposited $3,000 in a simple interest account 3 years ago. He has
earned $360 in interest so far. What is the interest rate for his account?
3. Clint earned $1,155 in interest from his simple interest account over the
last 5 years. The account pays 1.25% interest annually. How much did
Clint originally deposit in his account?
4. Hector took out a small loan of $900 for 18 months. The simple interest
rate on the loan was 10.5%. How much will he pay in interest on the
loan?
5. Susie opens a simple interest checking account. After 6 months, her
account grew from $500 to $508.75. What is the interest rate on her
account?
Interest

 Simple Interest
 Compound Interest
.

DEPARTMENT OF EDUCATION
Simple Interest

I = Prt

F=P+I

.
F = P + Prt

F = P(1 + rt)
DEPARTMENT OF EDUCATION
Simple Interest

 The unit for time (t) is in year(s).

 When given time (t) is in months,
convert it to year (divide by 12).
 When given time .
(t) is in days,
convert it to year (divide by 360 or
365).

DEPARTMENT OF EDUCATION
Simple Interest

When given time (t) is in days:

Ordinary Interest - all months of the
year are having 30 days, thus 360
days a year. .

Exact Interest - a year has exactly

365 days.

DEPARTMENT OF EDUCATION
SIMPLE INTEREST
SIMPLE INTEREST
Simple Interest

DEPARTMENT OF EDUCATION
Compound Interest

 If during the term of investment,

the interest due at stated intervals
is added to the principal and
thereafter earns interest, the sum
of the increases . over the principal
by the end of the term of
investment is called Compound
Interest.
DEPARTMENT OF EDUCATION
Compound Interest

Compound Amount - the total

amount due which consists of the
principal and the compound
interest.
Conversion Period. - the time
between the successive
conversions of interest into
principal.
DEPARTMENT OF EDUCATION
Compound Interest

Conversion Period - the number of

unit of time in one year as basis
for computing interest which
could be either (a)
. annually, (b)
semi-annualy, (c) quarterly, or
(d) monthly.

DEPARTMENT OF EDUCATION
Compound Interest

Nominal rate - refers to the rate of

borrowing and is usually quoted
as an annual interest
. rate, unless
otherwise specified.

DEPARTMENT OF EDUCATION
Compound Interest

Periodic rate or interest rate per

compounding period - refers to
the interest rate per conversion
period. It is equal to the nominal
rate divided by the
. compounding
period in a year.

DEPARTMENT OF EDUCATION
Compound Interest

Illustration:
Solve for the compound amount and
compound interest
.
at the end of 5
years if P10,000 is invested at 6%
compounded annually.

DEPARTMENT OF EDUCATION
Compound Interest
time Principal Interest Amount

1st year

2nd year

3rd year
.

4th year

5th year

DEPARTMENT OF EDUCATION
Compound Interest
time Principal Interest Amount
(P) (I) (F)
1st year P10,000 P600 P10,600

2nd year P10,600 P636 P11,236

3rd year P11,236 P674.16 P11,910.16

.

4th year P11,910.16 P714.61 P12,624.77

5th year P12,624.77 P757.49 P13,382.26

DEPARTMENT OF EDUCATION
 Compound Interest
Compound Amount
End of 1st Year Php 10,000(1  0.06)
Php 10,600 Php 10,000 (1 + 0.06)
End of 2nd Year Php 10,000(1  0.06)1  0.06
2
Php 11,236 Php 10,000 (1 + 0.06)
End of 3rd Year Php 10,000(1  0.06)1  0.06 (1  0.06)
Php 11,910.16 Php 10,000 (1 + 0.06)
3

End of 4th Year Php 10,000 (1 + 0.06)4

Php 12,624.77 Php 10,000(1  0.06)1  0.06 (1  0.06)(1  0.06)
End of 5th Year 5
Php 10,000 (1 + 0.06)
Php 13,382.26
Php 10,000(1  0.06)1  0.06 (1  0.06)(1  0.06)(1  0.06)
Compound Interest

C = P(1 + i) n

where, C = Compound amount

P = Principal or present value
.
i = Periodic interest rate
n = Total number of
compounding period
Compound Interest

Sample Problem.
1. Solve for the compound amount and the
compound interest at the end of 2 years if
P1,000 is invested at 8% compounded
quarterly.
Solution:
. C = P1,171.65
Data: P = P1,000
r = 8% or 0.08 I = P171.65

i = 0.02 (8% / 4) (quarterly)

n = 8 (no. of quarters in two yrs.)
Compound Interest
Sample Problem.
2. If P20,000 is invested for 5 years at 12%
interest compounded semi-annually, find the
value of F and the compound interest I.
Solution:
C = P35,816.94
Data: P = P20,000 .
I = P15,816.94
r = 12% or 0.12
i = 0.06 (12% / 2) (semi-annual)
n = 10 conversion period

DEPARTMENT OF EDUCATION
Answer the following questions correctly

1. Find the ordinary and exact interest on

P10 800.00 for 5 days at 8% simple interest.
2. Ana deposits P100 000.00 in a savings
account and leaves it there for 5 years to
accumulate interest at 9% compounded
semi-annually. Give the term for each value
in relation to the problem.
a. P100 000.00
b. 5 years
c. 4.5%
 THANK YOU!
PREPARED BY:

RACHEL P. MANGALAY
JOANNAH SICAO