Simple Interest
by CHED on June 16, 2017
lesson duration of 4 minutes
under General Mathematics
generated on June 16, 2017 at 06:26 pm
Tags: Simple and Compound Interest
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Generated: Jun 17,2017 02:26 AM
Simple Interest
( 4 mins )
Written By: CHED on May 27, 2016
Subjects: General Mathematics
Tags: Simple and Compound Interest
Resources
n/a
Content Standard
The learner demonstrates understanding of key concepts of simple and compound interests, and simple and general
annuities.
Performance Standard
The learner is able to investigate, analyze and solve problems involving simple and compound interests and simple
and general annuities using appropriate business and financial instruments.
Learning Competencies
The learner computes interest, maturity value, future value, and present value in simple interest and compound
interest environment.
The learner solves problems involving simple and compound interests.
Introduction 1 mins
Let the students recall from the previous lesson how to find the interest and maturity value of an amount earning
simple interest. Allow students to present their generalizations or formulas.
Lesson Proper 1 mins
(a) Discuss the procedure/formula in finding simple interest. An annual simple interest is based on the 3 factors:
a. Principal which is the amount invested or borrowed
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b. Simple interest rate, usually expressed in percent
c. Time or term of loan, in years
EXAMPLE 1. A bank offers 0.25% annual simple interest rate for a particular deposit. How much interest will be
earned if 1 million pesos is deposited in this savings account for 1 year?
Solution.
Answer: The interest earned is P2,500.
EXAMPLE 2. How much interest is charged when P50,000 is borrowed for 9 months at an annual simple interest rate
of 10%?
Solution.
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Answer: The simple interest charged is P3,750.
EXAMPLE 3. Complete the table below by finding the unknown
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EXAMPLE 4. When invested at an annual interest rate of 7%, an amount earned P11,200 of simple interest in two
years. How much money was originally invested?
Solution.
Answer: The amount invested is P80,000.
EXAMPLE 5. If an entrepreneur applies for a loan amounting to P500,000 in a bank, the simple interest of which is
P157,500 for 3 years, what interest rate is being charged?
Solution.
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Answer: The bank charged an annual simple interest rate of 10.5%.
EXAMPLE 6. How long will a principal earn an interest equal to half of it at 5% simple interest?
Solution.
Answer: It will take 10 years for a principal to earn half of its value at 5% simple annual interest rate.
Many persons or institutions are interested to know the amount that a lender will give to the borrower on the maturity
date. For instance, you may be interested to know the total amount of money in a savings account after t years at an
interest rate r. This amount is called the maturity value or future value F.
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EXAMPLE 7. Find the maturity value if 1 million pesos is deposited in a bank at an annual simple interest rate of
0.25% after (a) 1 year and(b) 5 years?
Solution.
Given: P = 1, 000, 000, r = 0.25% = 0.0025
Find: (a) maturity or future value F after 1 year
(b) maturity or future value F after 5 years
Note:
There are two ways to solve the problem.
Method 1: Solve the simple interest Is first and then add it to P , that is, F = P + Is.
Method 2: Use the derived formula F = P (1 + rt).
a. When t = 1, the simple interest is given by
Method 1:
Is =Prt
Is = (1, 000, 000)(0.0025)(1)
Is = 2, 500
The maturity or future value is given by F = P + Is
F =1,000,000+2,500
F = 1, 002, 500
Method 2: To directly solve the future value F,
F = P (1+rt)
F = (1, 000, 000)(1 + 0.0025(1))
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F = 1, 002, 500
Answer: The future or maturity value after 1 year is P1,002,500.
b. When t = 5,
Method 1:
Is =Prt
Is = (1, 000, 000)(0.0025)(5)
Is = 12, 500
F = P + Is
F =1,000,000+12,500
F = 1, 012, 500
Method 2:
F = P (1+rt)
F = (1, 000, 000)(1 + 0.0025(5))
F = 1, 012, 500
Answer: The future or maturity value after 5 years is P1,012,500.
For your information.
You may tell the students that savings accounts are covered by Philippine Deposit Insurance Corp (PDIC) up
to P500,000. This means that the money in the savings account is insured up to P500,000.
Seatwork 1 mins
Seatwork 1. Find the unknown principal P, rate r, time t, and interest I by completing the table.
Answer: (1) 12,000 (2) 100,000 (3) 0.5% (4) 3.34 (5) 203,500
Seatwork 2. Solve the following problems on simple interest.
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1. What are the amounts of interest and maturity value of a loan for P150,000 at 6 1% simple 2 interest for 3
years?
1. Answer:I
Answer:I = P29,250 F = P179,250
2. At what simple interest rate per annum will P25,000 accumulate to P33,000 in 5 years?
1. Answer: 6.4%
3. How long will P40,000 amount to P51,200 if the simple interest rate is at 12% per annum?
1. Answer: 2.33 years, or 2 years and 4 months
4. In order to have P200,000 in 3 years, how much should you invest if the simple interest is 5.5%?
1. Answer: 171,673.82
5. Angel deposited P20,000 in a bank that pays 0.5% simple interest. How much will be her money after 6
years?
1. Answer: P20,600
Evaluation 1 mins
(a) Match the terms in column A with the correct definitions in Column B. You may choose more than one answer from
Column B.
(b) Complete the table by finding the unknown.
(c) Solve the following problems.
1. Angel invested a certain amount at 8% simple interest per year. After 6 years, the interest she received
amounted to P48,000. How much did she invest?
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1. Answer: P100,000
2. Justin borrowed P5,000 at 5% annual simple interest rate. If he decided to pay after 1 year and 3 months,
how much should he pay by then
1. Answer: P5,312.50
3. How long will an amount of money double at a simple interest rate of 2% per annum?
1. Answer: 50 years
4. At what simple interest rate will an amount of money double itself in 10 years?
1. Answer: 10%
5. If a person borrowed P88,800 at an annual simple interest rate of 101% for 18 months, how 4 much interest
should he pay?
1. Answer: P13,653
Download Teaching Guide Book 0 mins
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