1 1 simple-interest

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1 1 simple-interest

  1. 1. Simple Interest
  2. 2. <ul><li>Interest – an amount charged for the use of money </li></ul><ul><li>Principal – the amount of money borrowed </li></ul><ul><li>Term – the length of the transaction period; it starts on the origin date and ends on the maturity date </li></ul><ul><li>Maturity value – the amount of money received at the end of the term; the sum of the principal and the interest earned </li></ul>
  3. 3. Origin date Maturity date Term Principal Maturity value
  4. 4. <ul><li>Simple interest – a type of interest wherein only the original principal earns interest for the duration of the term </li></ul><ul><li>Formula for simple interest I S : </li></ul>
  5. 5. <ul><li>Example. Find the interest earned after 3 years if Php12,000 is deposited in a savings account which earns 5% simple interest. </li></ul>
  6. 6. <ul><li>Formula for the maturity value F : </li></ul><ul><li>F is a future value, received at the end of the term. In this context, we say that the principal P is the current or present value of F . </li></ul>
  7. 7. <ul><li>Example. What is the maturity value of an 8,000-peso debt payable in 2 years at 12 ¾% simple interest? </li></ul>
  8. 8. <ul><li>Derived formulas: </li></ul>
  9. 9. <ul><li>Example: A 5-year investment had a maturity value of Php27,500. If the applied rate was 7.5% simple interest, what was the original principal? </li></ul>
  10. 10. <ul><li>Example: At what simple interest rate was Php16,500 invested if it earned an interest of Php1,620 just after 1.5 years? </li></ul>
  11. 11. <ul><li>Example: How long will it take a Php30,000 debt to earn an interest of Php4,500 if the simple interest being charged is 9%? </li></ul>
  12. 12. <ul><li>All About Time </li></ul>
  13. 13. <ul><li>Example. How much is the maturity value if Php14,500 is placed in an account earning 6.25% simple interest for 18 months? </li></ul>
  14. 14. <ul><li>Example. Find the present value of Php100,000, which is an amount due in 200 days, if money's worth is 10.5% simple interest. </li></ul>
  15. 15. <ul><li>Example. Find the maturity value of a 150,000-peso investment from May 24, 2011 to January 12, 2012 at 7.25% simple interest. </li></ul><ul><li>There are 233 days between the two dates. </li></ul>
  16. 16. <ul><li>Example. Find the maturity value of a 50,000-peso debt at 8.15% from May 24, 2011 to January 24, 2012. </li></ul>
  17. 17. <ul><li>1. Given P = Php 12,500 , r = 10% , t = 3.5 years, find I s . </li></ul>
  18. 18. <ul><li>3. Given P = Php 34,600 , r = 12 ¼ % , t = 7 years and 3 months, find F . </li></ul>
  19. 19. <ul><li>5. Given F = Php 37,450 , r = 8.3% , t = 6 years, find P . </li></ul>
  20. 20. <ul><li>7. Given P = Php 36,000 , I s = Php 30,240 , t = 7 years, find r . </li></ul>
  21. 21. <ul><li>9. Given P = Php 350,000 , I s = Php 257,250 , r = 10.5% , find t . </li></ul>
  22. 22. <ul><li>13. Susan lends Php50,000 to Jane on October 1, 2010. She expects Jane to pay the principal and simple interest at 9% to fully settle the debt on March 28, 2011. What amount does Susan receive? </li></ul>
  23. 23. <ul><li>15. Find the principal which will amount to Php3,066,000 in 3 years at 9.25% simple interest rate. </li></ul>
  24. 24. <ul><li>17. Accumulate Php85,000 for 20 months at a simple interest rate of 12%. </li></ul><ul><li>(Note: To accumulate an amount means to find its maturity value.) </li></ul>
  25. 25. <ul><li>19. At what simple interest rate will Php415,000 increase to Php500,000 in 3 years? </li></ul>
  26. 26. <ul><li>21. When will Php42,000 increase to Php50,000 if the simple interest rate at which it is invested is 11.4%? </li></ul>
  27. 27. <ul><li>27. In what time will Php5,000 double itself at the rate of 9% simple interest? </li></ul>

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