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Computing Simple Interest Problem

The document discusses simple interest formulas and examples. It defines the key variables in simple interest calculations as P (principal), r (interest rate), t (time), I (interest), and F (future value). It then provides examples of using the simple interest formulas to calculate interest earned, present value, and future value.

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Rashid Ignacio
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
2K views

Computing Simple Interest Problem

The document discusses simple interest formulas and examples. It defines the key variables in simple interest calculations as P (principal), r (interest rate), t (time), I (interest), and F (future value). It then provides examples of using the simple interest formulas to calculate interest earned, present value, and future value.

Uploaded by

Rashid Ignacio
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 18

The following variables will be in our mathematical

treatment of simple interest:


P= Principal amount of the loan or investment
 

r= Annual rate of simple interest


t= Time period (term) of the loan or investment
I= Amount of interest paid or received.
F= Maturity value of the loan or investment
Simple Interest Formula:
I= Prt F= P + I
I=F-P F= P(1+rt)
A. Computing the
Interest
Example 1:

What amount of interest will be charged on


7,300 pesos borrowed for 3 years at a simple
interest rate of 12% per annum?
Solution:
Given:
P= 7,300 r= 12%=0.12 t= 3 years
I= Prt
I= 7,300 (0.12)(3)
I= 2, 628 pesos
Therefore, the Principal will earn an interest of
2, 628 pesos
Example 2:

Maria paid 9,250 pesos on a loan made 6


months before at 12% simple interest. Find the
interest generated.
Solution:
 
Given:
F= 9,250 r= 12%=0.12 t= 6 mos. (0.50 yrs.)
F=P(1+rt) ->

P=8, 726.42 pesos


Solution:
Given:
F= 9,250 r= 12%=0.12 t= 6 mos. (0.50 yrs.) P= 8, 726.42

F=P+ I -> I = F – P
I =9,250 – 8, 726.42
I= 523.58 pesos

Therefore, the interest will amount to 523.58 pesos


B. Computing the
Present Value
Example 1:

If a nine- month term deposit at a bank a


simple interest rate of 9% per annum, how
much will have to be deposited to earn 225
pesos of interest?
Solution:
 Given:
I= 225 pesos r= 9%=0.09 t=9 mos./12 mos (0.75 yrs.)

P=3,333.33pesos

Therefore, 3,333.33 pesos must be placed in a nine month term


deposit to earn 225 of interest.
Example 2:
 
What is the present value of
5, 275 pesos due in 6 months if 11% interest
is paid?
F= P(1+rt)

P=5,000 pesos
C. Computing the
Future Value
Example 1:

Aaron makes an investment by lending


24,000 to Bartolome for 2 years at an
interest of 11% per annum. What is the
maturity value of the investment?
Solution:
Given:
P= 24,000 r= 11%=0.11 t= 2 years

I= Prt
I= 24,000 (0.11)(2)
I= 5,280
Solution:
Given:
P= 24,000 r=11%=0.11 t= 2 yrs I= 5,280
F= P + I
F= 24,000 + 5,280
F= 29,280 pesos

Therefore, the maturity value is 29, 280 pesos


Alternative Solution
Solution:
Given:
P= 24,000 r= 11%=0.11 t= 2 years

F=P(1 +rt)
F= 24,000 [1+(0.11)(2)]
F= 24,000 (1.22)
F= 29,280 pesos
Example 2:

 
Abel placed 18,000 pesos in a 240 –day term
deposit earnings 8 ½ % per annum. How
much will the bank pay Abel on the maturity
date? F= P (1+rt)
F= 18,000 (1 + (0.085)
F= 19, 020 pesos

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