This document discusses simple interest, how it is calculated, and examples of simple interest problems. It defines simple interest as interest calculated on the original principal amount for a period of time. The key formula provided is: Interest = Principal x Rate x Time. Several examples are shown calculating simple interest for different scenarios involving principal amounts, interest rates, and time periods. The document also discusses using simple interest formulas to calculate the maturity or future value after a period of time. Activity problems are presented at the end for the reader to practice calculating simple interest, interest amounts, and maturity values.

2. INTEREST
Interest is the fixed amount paid on
borrowed money. The sum lent is called the
Principal.
Interest is of two kinds: (i) Simple interest
(ii) Compound interest
Simple interest: When interest is calculated
on the original principal for any length of
time, it is called simple interest.

3. ANNUAL SIMPLE INTEREST
Is = Prt
where
Is = simple interest
P = principal or the
amount
invested or
borrowed
r = simple interest
rate
t = term or time 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?
Given: P = P 1,000,000.00 r = 0.25% =
0.0025 t = 1 year
Find: Is
Solution: Is = Prt
Is = (P 1,000,000.00)(0.0025)(1)
Is = P 2,500.00

4. Example 2:
How much interest is charged when P 50,000.00 is borrowed for 9
months at an annual interest rate of 10%?
Given: P = P 50,000.00 r = 10% = 0.10 t = 9 months = 9/12 =
Find: Is
Solution: Is = Prt
Is = (P 50,000.00)(0.10)(0.75)
Is = P 3,750.00

5. Maturity (Future) Value
F = P + Is equation 1 -------- substituting Is = Prt
where F = P + Is
F = maturity (future) value F = P +
Is = simple interest F = P(1 + rt)
equation 2
P = principal or the amount
invested or borrowed
r = simple interest rate
t = term or time in years

6. Example 3:
Find the maturity value if 1 million pesos is deposited in a bank at
annual simple rate of 0.25% after 5 years?
Given: P = P 1,000,000.00 r = 0.25% = 0.0025
Find: maturity or future value (F) after 5 years
Solutions:
using equation 1: using equation 2 :
F = P + Is F = P (1 + rt)
F = (P 1,0000,000.00 + (P 1,000,000.00)(0.0025)(5) F = (P
1,000,000.00)(1 + (.0025)(5)
F = P 1,000,000.00 + P 12,500.00 F = (P
1,000,000.00)(1.0125)
F = P 1,012,500.00 F = P 1,012,500.00

7. Activity 1
Principal (P) Rate (r) Time (t) Interest (Is)
P 2,000.00 5% 3 years (1)
(2) 12% 5 years P 20,000.00
P 88,000.00 (3) 10 months P 8,000.00
P 500,000.00 9.5% (4) P 285,000.00
P
1,000,000.00
0.5% 8 months (5)
Complete the table below.
 Use short bond paper (encoded or
handwritten)
 Support your answers with
solutions.

8. Activity 2
Complete the table below.
 Use short bond paper (encoded or
handwritten)
 Support your answers with
solutions.
Present
Value (P)
Rate (r) Time (t) Interest
(Is)
Maturity
Value (F)
P 8% 6 years (1) (2)
P (3) 1 month (4) P
(5) 12% 5 years
3 months
P
400,00.00

9. KEEP SAFE
GOOD LUCK
GOD BLESS
Sir A