Story: Borrow ₱1000 from the Bank

Alex wants to borrow ₱1000 and will be paid after

one year. The local bank says “10% interest” per annum.
So to borrow the ₱1000 for 1 year will cost:
₱1000 x 0.1 = ₱100
After one year, Jobert paid the full amount he borrowed with
the cost of the money for 1 year. And he lived happily ever after.
The End
Questions:
1. What amount of money was borrowed?
2. What amount of money was paid in full?
3. What was the promised time the money will be paid in
full?
4. How much was added to the borrowed money after 1
year?
5. What do you call to the amount added to the borrowed
money after 1 year?
 Interest
In its simplest description, is a fraction
or percentage being imputed to a sum of
money.
More than One Year …
What if Alex wanted to borrow the money
for 2 Years?

SIMPLE INTEREST
Simple interest is essentially the interest charged to a
borrower or earned by a lender for a full term of the
loan.
If the bank charges “Simple Interest” then Alex just pays another 10% for
the extra year.

Alex pays Interest of ($1,000 x 10%) x 2 Years = $200

That is how simple interest works … pay the same amount of interest every
year…
Simple Interest Formula

𝐼 = 𝑃𝑟𝑡
where

• 𝐼 = interest
• 𝑃 = amount borrowed ‘Principal’
• 𝑟 = interest rate
• 𝑡 = time
Example 1:
Alex borrows ₱1,000 for 5 Years, at 10% simple interest. How much is
the total amount that Alex will pay to the bank after 5 Years?

Example 2:
Suppose you want to borrow money from your friend to buy a
concert ticket for your favorite band. Since you prefer a front row
seat, the cost of the concert ticket you need to buy is ₱10,000. Your
friend agreed to lend you ₱10,000 payable in 12-months and with
interest rate of 5% per annum. How much will be the interest that
you have to pay your friend? How much in total amount you need to
pay at the end of 12-month period?
Example 3:
Suppose you have savings. Your friend approached you and asked if you
can lend him ₱10,000 for his tuition fee payment. He said he is willing
to pay 5% interest per annum payable in 6 months. You agreed with the
terms. How much interest should your friend pay you after 6 months?
How much is the total amount you should receive after 6 months?
Example 4:
Telco A has a tie-up promotion with Bank B in its latest smartphone
offering bundled with their postpaid plan. The smartphone costs
₱30,000. Credit card holders of Bank B can avail of the promo of
reduced installment interest rate from 5% to 3% per month if they avail
of the 24-month installment plan. If you will avail of the promo, how
much will be your equal monthly installment payment payable to Bank
B using the simple interest method? How much interest will you save in
availing the promo?
Example 5:
You decided to purchase a ₱50,000 LED TV through your credit card.
After a month, you discovered from your statement of account that
you were charged with ₱1,000 interest. How much was the monthly
interest rate applied to your credit card purchase?
EXAMPLE 6: Complete the table below by finding the
unknown

Principal (P) Rate (r) Time (t) Interest

(a) 2.5% 4 1,500
36,000 (b) 1.5 4,860
250,000 0.5% (c) 275
500,000 12.5% 10 (d)
EXAMPLE 7:
When invested at an annual interest rate of 7%, an amount earned
₱11,200 of simple interest in two years. How much money was
originally invested?

EXAMPLE 8:
If an entrepreneur applies for a loan amounting to ₱500,000 in a
bank, the simple interest of which is ₱157,500 for 3 years, what
interest rate is being charged?
EXAMPLE 9:
How long will a principal earn an interest equal to half of it at 5%
simple interest?
 Maturity (Future) Value
EXAMPLE 1:
Find the maturity value if 1 million pesos is deposited in bank at an
annual simple interest rate of 0.25% after (a) 1 year and (b) 5 years?
EXAMPLE 2: Complete the table by finding the unknown.

Principal (P) Rate (r) Time (t) Interest (I) Maturity Value
(F)
60,000 4% 15 (1) (2)
(3) 12% 5 15,000 (4)
50,000 (5) 2 (6) 59,500
(7) 10.5% (8) 157,500 457,000
1,000,000 0.25% 6.5 (9) (10)