The following variables will be in our mathematical

treatment of simple interest:

P= Principal amount of the loan or investment
 

r= Annual rate of simple interest

t= Time period (term) of the loan or investment
I= Amount of interest paid or received.
F= Maturity value of the loan or investment
Simple Interest Formula:
I= Prt F= P + I
I=F-P F= P(1+rt)
A. Computing the
Interest
Example 1:

What amount of interest will be charged on

7,300 pesos borrowed for 3 years at a simple
interest rate of 12% per annum?
 Solution:
Given:
P= 7,300 r= 12%=0.12 t= 3 years
I= Prt
I= 7,300 (0.12)(3)
I= 2, 628 pesos
Therefore, the Principal will earn an interest of
2, 628 pesos
Example 2:

Maria paid 9,250 pesos on a loan made 6

months before at 12% simple interest. Find the
interest generated.
 Solution:
 
Given:
F= 9,250 r= 12%=0.12 t= 6 mos. (0.50 yrs.)
F=P(1+rt) ->

P=8, 726.42 pesos

 Solution:
Given:
F= 9,250 r= 12%=0.12 t= 6 mos. (0.50 yrs.) P= 8, 726.42

F=P+ I -> I = F – P
I =9,250 – 8, 726.42
I= 523.58 pesos

Therefore, the interest will amount to 523.58 pesos

B. Computing the
Present Value
Example 1:

If a nine- month term deposit at a bank a

simple interest rate of 9% per annum, how
much will have to be deposited to earn 225
pesos of interest?
Solution:
 Given:
I= 225 pesos r= 9%=0.09 t=9 mos./12 mos (0.75 yrs.)

P=3,333.33pesos

Therefore, 3,333.33 pesos must be placed in a nine month term

deposit to earn 225 of interest.
 Example 2:
 
What is the present value of
5, 275 pesos due in 6 months if 11% interest
is paid?
F= P(1+rt)

P=5,000 pesos
C. Computing the
Future Value
Example 1:

Aaron makes an investment by lending

24,000 to Bartolome for 2 years at an
interest of 11% per annum. What is the
maturity value of the investment?
 Solution:
Given:
P= 24,000 r= 11%=0.11 t= 2 years

I= Prt
I= 24,000 (0.11)(2)
I= 5,280
 Solution:
Given:
P= 24,000 r=11%=0.11 t= 2 yrs I= 5,280
F= P + I
F= 24,000 + 5,280
F= 29,280 pesos

Therefore, the maturity value is 29, 280 pesos

Alternative Solution
 Solution:
Given:
P= 24,000 r= 11%=0.11 t= 2 years

F=P(1 +rt)
F= 24,000 [1+(0.11)(2)]
F= 24,000 (1.22)
F= 29,280 pesos
Example 2:

 
Abel placed 18,000 pesos in a 240 –day term
deposit earnings 8 ½ % per annum. How
much will the bank pay Abel on the maturity
date? F= P (1+rt)
F= 18,000 (1 + (0.085)
F= 19, 020 pesos