The document defines simple interest and simple discount, providing formulas to calculate both. Simple interest is calculated on the original principal for the full time period at the stated interest rate. Simple discount is a deduction from the maturity value when the obligation is sold before the due date, calculated as a percentage of the maturity value rather than the principal. Formulas and examples are provided to demonstrate calculating simple interest between dates using the banker's rule.

1. Topic: Simple Interest and
Simple Discount

2. Contents
Learning Outcome
1. Differentiate simple interest for simple
discount
2. Compute simple interest using actual
or appropriate time

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Definition of Terrns:
Interest. It is the payment for the
use of a given sum of money over a
period of time. Thus, at simple
interest rate, the interest is
computed on the original principal
during the whole time at the stated
interest rate.

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Prophase investigation
Discount. It is a deduction from the
maturity value of an obligation when
the obligation is sold before its due
date of maturity. It is a percentage of
the amount or maturity value and not
a percentage of the principal.

5. Formulas
Simple
Interest
1 = Prt
Notations
I = Simple
Interest

6. Derived formulas from
Simple Interest formula
P=I/rt
r=I/pt
t=I/pr

7. Design goals
P Principal, Face Value, Present Value or
Proceeds
r rate of interest
t = time (expressed in years or Fractional parts of
a year)
F = Final Amount
I o=Ordinary Interest
l e=Exact Interest
D =Simple Discount
d = discount rate

8. Final Amount
FP+1
F = P(1+rt)
Simple Interest based on F and P
1-F-P
Simple Interest formulas when t is expressed in days
Io= Pr no.of days /360
le= Pr no. of days /365

9. Simple Interest formulas when t is expressed
between dates
lo=Pr Actual no. of days/360 (Known as the
Banker's Rule)
lo = Pr Approximate no. of days/360
le = Pr Actual no. of days/365
Ie= Pr Approximate no. of days/365

10. Effect map
Simple Discount
D=Fdt. d=d/Ft. F=D/dt
D=F-P. t=D/Fd
Present Value or Proceeds
P=F-D
or
P=F(1-dt)

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Simple Interest rate equivalent to a given
Simple Discount rate
r= d/1-dt
Simple Discount rate equivalent to a given
Simple Interest rate
d=r/ 1+rt

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To discount F for t years at simple
discount rate d, use
D=Fdt then P=F-D
At simple interest rate r, use
P=F/1+rt

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Illustrative Problems
1. Mary Grace borrowed P5,000 from Pearl on March
23, 1995 and promised to pay the principal and
simple interest at 9% to discharge the dept on
December 18, 1995. What amount should be paid on
the maturity date?
Solution:

14. In this workbook, use the Bankers Rule in
finding simple interest between dates
unless otherwise directed.
Actual no. Of days (use table 1)

15. 12/18 = 352
3/23 = 82/270 days
Simple Interest by the Banker's Rule
Io= pr Actual no. of days /360
= (P5,000) (.09)270/ 360
= P337.50
Amount to be paid on maturity date
F=P+1 = P5,000+ P337.50
= P5,377.50

16. Activity 1
Mr. Tan borrowed P6,000 from
Tony on February 28, 2019 and
promised to pay the principal and
simple interest at 10% to
discharge the dept on December
13, 2019. What amount should be
paid on the maturity date?