Simple Interest COmputing the Interest, Future Value and Present Value of the Simple Interest

1. Lesson 1: Simple
Interest

2. I N T R E S T
E

3.  Interest (I) – the amount paid or earned for the use of money.
 Principal (P) – the amount of money borrowed or invested on the origin
date.
 Rate (r) – the annual rate, usually in percent, charged by the lender, or
rate of increase of the investment.
 Time or Term (t) – It is the amount of time in years the money is
borrowed or invested, length of time between the origin and maturity
dates.
 Lender or Creditor - person (or institution) who invests the money or makes the funds
available
TERMINOLOGIES

4. Borrower or Debtor
person (or institution) who owes the money or avails of the funds
from the lender
Origin or loan date
date on which money is received by the borrower
Repayment or maturity date
date on which the money borrowed or loan is to be completely repaid
Maturity Value or Future value (F)
amount after t years that the lender receives from the borrower on
the maturity date
TERMINOLOGIES

5. Suppose you won 10, 000 pesos and you plan to invest it for 5 years.
The cooperative group offers 2% simple interest per year.
How much interest will you gain every year?
How much is your money per year?
Time Principal Interest Rate
Simple Interest
Amount after t years
(Future Value)
Solution Answ
er
1
10, 000
2% or 0.02 (10,000)(0.02)(1) 200 10, 000 + 200 = 10, 200. 00
2 2% or 0.02 (10,000)(0.02)(2) 400 10, 000 + 400 = 10, 400. 00
3 2% or 0.02 (10,000)(0.02)(3)
4 2% or 0.02
5 2% or 0.02

6. To Compute the Interest of Simple Interest
Simple Interest has the formula of Is = Prt
Where,
 Simple interest is represented with the variable Is.
 Principal amount is represented with the variable P.
 Rate of interest is represented with the variable r.
 Time is represented with the variable t.

7. To Compute the Future Value
Simple Interest has the formula of F = P + Is
• Future for F
• Simple interest is represented with the variable Is.
 Principal amount is represented with the variable P.

8. 𝑷 =
𝑰𝒔
𝒓𝒕
Where,
 Simple interest is represented with the variable Is.
 Principal amount is represented with the variable P.
 Rate of interest is represented with the variable r.
 Time is represented with the variable t.
And to compute the present value

9. 1. A bank offers 0.5% annual simple interest rate for
a particular deposit. How much interest will Joseph
will be earned if 1 million pesos is deposited in his
savings account for 1 year? How much money
would he have after 1 year?
Given: P = 1,000,000
r = 0.5% = 0.05
t = 1 year

10. Given: P = 1,000,000
r = 0.5% = 0.05
t = 1 year
Solution:
Is = Prt
Is = (1,000,000) (0.05) (1)
Is = 50, 000
Answer: The interest earned is P 50, 000. After 1 year, he would
have P 1, 050, 000

11. 2. Sarah deposits P4,000 at a bank at an
interest rate of 4.5% per year. How much
interest will she earn at the end of 3
years?
Given: P = 4,000
r = 4.5% = 0.045
t = 3 years

12. Given: P = 4,000
r = 4.5% = 0.045
t = 3 years
Solution:
Is = Prt
Is = (4,000) (0.045) (3)
Is = 540
Answer: The interest earned is P 540.

13. 3. A bank offers at an interest rate of 10%
per year, Wanda wants to borrowed money
for a 2-year period. How much money she
borrowed, if the interest after 2 years is
P 1, 200?
Given: I = 1, 200
r = 10% = 0.10
t = 2 years

14. Solution:
𝑷 =
𝑰𝒔
𝒓𝒕
𝑷 =
𝟏, 𝟐𝟎𝟎
𝟎. 𝟏𝟎 (𝟐)
𝑷 = 𝟑𝟎, 𝟎𝟎𝟎
Answer: The borrowed money is 30,000.
Given: I = 1, 200
r = 10% = 0.10
t = 2 years