GRADE 11 – BUSINESS MATHEMATICS

QUARTER 2 – WEEK 4 LESSON: PROBLEM SOLVING INVOLVING INTERESTS AND COMMISSIONS

Objective:
➢ Solve problems involving interests and
The charge for the privilege of borrowing money is
commissions.
called an INTEREST. In loans, it may be treated as an
expense on the part on the part of the borrower of
BUSMATH BRUSH UP: What do I Know?
debtor and may be viewed as an income on the part
Find the part that corresponds with each percent.
1 of the lender or creditor. Short-term and long-term
1. 1% of 100 11. % 𝑜𝑓 100
4 credits or transactions are commonly offered by
2. 5% of 200 3
12. % 𝑜𝑓 200 banks or any credit companies. Short credits are
4
3. 1% of 800 1
13. % 𝑜𝑓 400 credits good for one day or up to one year, while
2 long term credits are those for longer than one year.
4. 5% of 50 2
14. % 𝑜𝑓 300 To compute the simple interest, we use I=PRT,
5
5. 3% of 400 1
15. % 𝑜𝑓 10 where P is the principal, R annual interest rate, and
8
6. 5% of 600 1
16. % 𝑜𝑓 300 T is the time interest period (in years).
4
7. 8% of 30 1
17. % 𝑜𝑓 130 Simple interest is interest paid only on the
4
8. 5% of 420 3 original amount of money or principal.
18. % 𝑜𝑓 140
4
9. 4% of 100 1
19. % 𝑜𝑓 150 The maturity value M that the lender receives from the
8
10. 5% of 2000 1
20. % 𝑜𝑓 600 debtor on the maturity date of the loan is equal to the
7
(Check correct answers at the back page of SLM) sum of the principal P and the simple interest I. That is,
we have
BUSMATH PUNCH: What’s in? M = P + I.
Solve the following problems. Since I = Prt, we get
1. Joel is looking for a new and used cars. He found M = P + Prt = P(1 + rt)
out that a new car costs ₱800,000. Typically, a
used car goes for 55% of the price of a new car. SIMPLE INTEREST AND MATURITY VALUE
What is the price of a used car? Example:
2. At a local store, the amount of money used for October last year, Carl borrowed an amount of ₱200,000
paying monthly bills is 20% of the total earnings. from PQR Cooperative at an interest rate of 2% to finance
If ₱7,000 is paid for the monthly bill, how much his house renovation. How much is the interest if his due
is the total earnings? date is October this year?
3. If Matt receives ₱40,000 monthly salary for
working as an agent, and he spends 40% of his In the loan made by Carl, the loan interest is computed
salary on food expenses each month, how much as follows:
money does Matt have to spend on food Given
expenses? P = ₱200,000
4. A school canteen earns ₱50,000 a month. From R = 2% = 0.02
it, ₱15,000 is used for paying the rent. What T = 1 year
percent of the total earnings goes to paying the
rent? Solution:
5. Forty percent of a company’s monthly budget I = Prt
goes to the salaries of its employees. If the total = 200,000 (0.02)(1)
amount for the salary is ₱1,523,480, how much = ₱4,000
is the company’s monthly earnings? Note: The amount of money, ₱200,000, which was
(Check correct answers at the back page of SLM) borrowed from the cooperative is called the principal, P,
and the interest charged, I = ₱4,000, is a percent of
BUSMATH BULL’S EYE: What’s new? principal. The period of time where the lender or creditor
(Read the “Objectives” to set your goal and hit the bull’s will charge the interest starting from loan date up to the
eye.) loan repayment date is called loan term or interest
period, T, which is 1 year in the problem, and the quoted
percent is the rate 2%, which is R.

Example 3.6.1
Compute the interest on a credit purchase of ₱30,000 at
8% for 10 and 15 months.
Solution:
Interest for 10 months; uses the ordinary interest method to compute for the
I = Prt interest while Company B applies exact interest method.
0.08 Which company will he choose? What is the difference
= 30,000 ( ) (10)
12
= ₱2,000 between the interests offered by the two companies?
Interest for 15 months;
I = Prt Solution:
0.08 In ordinary interest,
= 30,000 ( ) (15) R
12 I=P∙ ∙ T
= ₱3,000 360
0.09
= 30,000 ( ) (90)
360
Example 3.6.2 = ₱675
Find the maturity value of a loan of ₱5,000 borrowed at
an interest rate of 15% if it has to be repaid for 18 In exact interest,
months. I=P∙
R
∙ T
365
Solution: 0.09
M = P(1 + rt) = 30,000 ( ) (90)
365

= 5,000 [1 +
0.15
] (18) = ₱665.75
12 Here are the advantage of 365-day year offered by
= ₱6,125
Company B is more realistic and financially better for the
borrower since the interest is smaller under the same
Example 3.6.3
interest rates. He could save an amount of 675 – 665.75
Convert each rate.
= ₱9.25 if he borrowed the money from Company B
a. 15% per year to the equivalent monthly rate.
instead of borrowing it from Company A.
b. 1.5% per month to the equivalent annual rate.
Solution:
Example 3.6.5
a. Divide the annual rate by 12 to obtain
Using exact interest, what is the amount due on ₱20,000
15 ÷ 12 = 𝟏. 𝟐𝟓% monthly
invested at 0.09% simple interest for 150 days?
b. Multiply the monthly rate by 12 to get
Solution:
1.5 x 12 = 18% annually
M = P (1 + rt)
0.0009
Example: = 20,000 [1 + ( ) (150)]
365
₱52,000 is invested in an account that earns 5.75% = ₱20,007.40
annually. The interest earned is ₱4,485. How much time
was the money invested for? Commission maintains the relationship between the
Solution: employer and the employees of the firm. It acts as an
4485 = (52,000)(0.575)(t) agreement between the sales people and the firm for
4485 = (2990)(t) specific targets that need to be reached. It may also serve
4485 = 2990 ∙ 𝑡 as the reward for the services rendered by the sales
2990 2990
1.5 = t In sales, the amount of money received by an
employee or agent for performing a business
ORDINARY AND EXACT INTEREST transaction or service is called commission.
- suppose the term of the loan is stated as a Quantity Sold x Rate of commission = Commission
certain number of days, we may divide the
number of days by 365 or 360. When the divisor people.
is 360, we are applying ordinary interest, which
is still used by many businesses nowadays. The Example:
banks and other credit unions use the exact Prince sells decorative notepads and is paid a straight
interest, in which 365 is used as follows: commission of ₱0.80 on each notepad he sells. During
We replace the formulas in I=Prt, where T is expressed in December, he sold 750 notepads. Find his commission.
days as follows: Solution:
For Ordinary Interest: 𝐼 = 𝑃 ∙
𝑅
∙ 𝑇 750 pcs. x 0.80 pesos = ₱600
360
𝑅
For Exact Interest: 𝐼 = 𝑃 ∙ ∙𝑇 Example:
365
Lawrence is paid a commission of 12% on all sales above
₱7,000 for the week. He is also paid a weekly salary of
Example 3.6.4 ₱380. What are his total earnings for a week in which his
Francis wants to know which credit company offers lower sales were ₱9,800?
interest at the same interest rate of 9% if he plans to Solution:
borrow a quick cash of ₱30,000 for 90 days. Company A Sales 9,800 Salary 380
Quota – 7,000 Commission + 336 5. Angela read an advertisement for a ₱50,000
2,800 716 loan. The ad informs the borrower that the
Commission: 12% of 2800 = 336 company only charges 18% annual interest. If she
Lawrence total earnings were ₱716. plans to borrow that amount and repays it at the
end of the year, how much is the interest? What
is the amount of interest each month?
Example:
The rate may be 3% on the first ₱12,000 of sales; 4% on “I Can Do All Things Through Christ Who
the next ₱6,000; and 5% on sales over ₱18,000. Strengthens Me”- Philippians 4:13
Solution:
Commission on first ₱10,000: 10,000 x 0.04 = ₱400
Sales over ₱10,000: 38,000 – 10,000 = ₱28,000
Prepared by:
Commission on sales over ₱10,000: 28,000 x 0.10 =
JOANNA RUTH O. DALISAY
₱2,800
Total Commission: 400 + 2,800 = ₱3,200

BUSMATH BOOSTER: What have I learned?

Find the missing variable using the basic interest formula.
A. Ordinary Interest Method
PRINCIPAL RATE TIME INTEREST
1 ₱6,000 6% 60 DAYS
2 ₱1,500 90 DAYS ₱30
3 ₱8,620 15% 1 MONTH
4 ₱1,600 135 DAYS ₱42
5 ₱7,200 10% ₱540

B. Exact Interest Method

PRINCIPAL RATE TIME INTEREST
1 ₱810 7.5% ₱14.98
2 6% 105 DAYS ₱25.3
3 ₱11,400 5% 1 MONTH
4 ₱875 120 DAYS ₱17.26
5 ₱2,400 7% ₱23.01
(Check correct answers at the back page of SLM)

BUSMATH BUNCH OF ASSESSMENT: What can I do now?

Solve the following problems.
1. Dianne has a loan with an interest rate of 6%. The
amount of interest is ₱43.75 for a period of 75
days. How much is her loan using ordinary
interest method?
2. Paul repaid a total of ₱762.39 on the due date of
his loan. How much is the rate that the lender
charged Paul if he borrowed an amount of ₱750
for 45 days using exact interest?
3. Complete the table below showing the
equivalent monthly to yearly rates, and vice-
versa.
MONTHLY ANNUAL RATE
RATE
14%
0.75%
1
1 %
2
18%
2
%
3
4. A commercial bank charges 9% interest for a
120-day loan. If the exact interest amount is
₱264, how much is the principal amount?