Simple Interest and

Simple Discount
Simple Interest
 Interest can be defined as money paid for the use of borrowed
money or a sort of profit in lending money
 Simple interest is an interest once over a period of time.

 Simple interest = (Principal Amount)(Interest Rate)(Time)

Simple Interest

 Final Amount or Maturity Value

 Final Amount = Simple Interest + Principal Amount
Simple Interest

 Find
the interest and the final amount due on P
5500 at a simple interest rate 15 ½% for 9 months.
Simple Interest

 Mr. Ty paid P1222.50 on a loan made 3 months

ago at 12 ½ % simple interest. Find the original
amount of the loan.
Simple Interest

 The interest on a loan of P15000 is P4500. If the

rate is 14%, when is the loan due?
Types of Interest

 Ordinary Interest :

Exact Interest:
Time between Dates

 Approximate Time:
 The number of days between dates where each month is assumed
to have 30 days each.
 Actual Time:
 Thetotal number of days between dates is based on the actual
number of days in the calendar of each month
Time between Dates

 Findthe approximate and actual number of days

between March 15, 2013 to December 20 of the
same year
Orly borrowed
P10,000 from Art on
Dec 15, 2015 at 16%
simple interest to be
paid on Feb 21, 2016.
Find the final amount.
Approximate Time Actual Time
Mar 15 Mar 16
Apr 30 Apr 30
May 30 May 31
Jun 30 Jun 30
Jul 30 Jul 31
Aug 30 Aug 31
Sep 30 Sep 30
Oct 30 Oct 31
Nov 30 Nov 30
Dec 20 Dec 20
275 Days 280 days
Bank Discount
 Bank Discount or Discount is an interest deducted in
advance and it is based on the final amount of the loan
 It is given by

F=final amount
d= discount rate
t= time or term of loan
 Proceeds= the borrower receives after the discount has been
deducted

 Proceeds= Final Amount - Bank Discount

 P= F(1-dt)
Promissory Notes

 Promissory note is a written promise by a borrower to a

lender as an evidence of indebtness payable within
specified time in the future
Promissory Notes
 Definitions:
 Face value is the amount loaned or borrowed
 Date is the date the note is drawn
 Term is the time from the date when the note was written to the
maturity date
 Rate is the percent at which interest is to be computed
 Drawee or payee is the party to whom the note is due
 Drawer is the writer of the note
 Maturity date is the date the note will mature or becomes due
 Maturity value is the face value plus interest, if any
Promissory Notes
 Non Interest- Bearing Note

P6,000 Quezon City , Philippines April 10, 2018

Ninety days after date, for the value received, at 12% p.a. the
undersigned promises to pay to the order of Cory Sales, the sum of six
thousand, including all interest due on maturity.

Payable at QC Bank.
(Signed) Mary de Leon

In a non-interest- bearing note, the face value is the maturity value, but this
does not necessarily mean that the original debt did not bear interest. It
merely means that the interest if any has been computed and added and the
result is specified as the face value of the note.
Promissory Notes

 Interest- Bearing Note

P10,500 Manila, Philippines April 20, 2011

Sixty days after date, for the value received, the undersigned promises
to pay to the order of Art del Rosario, the principal sum of ten thousand,
five hundred and no/100 pesos with interest from date at 14% p.a.

Payable at City Bank, Manila

(Signed)Orly Veloso
Discounting Promissory Notes before
Maturity
Discounting Promissory Notes before
Maturity
 A 6-month note with a face value of P10,000 bears interest
at 13 ½ % discounted 2 months before maturity at a
discount rate of 15%. Find the proceeds of the note.
 6 months

Principal=P10,000 Maturity Value=P10,675

TIME LINE

Date the note was

written Discount Date Maturity date

Discount Period=2 months

Maturity Value= P(1+RT)
= (10,000)(1+0.135*6/12)
=10, 675

Proceeds= MV(1-DT)
= (10,675)(1-0.15*2/12)
=10,408.13