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TITLE

DEFINITION
INTEREST

THE MATHEMATICS OF
SIMPLE,
SIMPLE

ORDINARY
& EXACT
FINANCE INTEREST
ORDINARY
& EXACT
TITLE

MANAGEMENT
FINANCE
DEFINITION

OF
MONEY
INTEREST

03
LENDING 05
SAVING
01
INVESTING
SIMPLE
ORDINARY
& EXACT

06
02 04 FORECASTING
BORROWING
BUDGETING
TITLE

INTEREST
SIMPLE
ORDINARY
EXACT
DEFINITION

Payment by a person or entity for the use of borrowed money

PRINCIPAL, P
INTEREST

RATE, r
%
SIMPLE

TIME, t
ORDINARY

DEBTOR LENDER
& EXACT

INTEREST, I
TITLE
interest that is calculated only on
SIMPLE the amount of money invested or
borrowed and not on the interest that
DEFINITION

I N T E R ES T has already been added to it


INTEREST

I = Prt
SIMPLE

%
ORDINARY
& EXACT
TITLE
MRS. SANCHEZ APPLIES FOR A HOUSING LOAN.
SIMPLE IF SHE LOANED ₱ 500,000 AT THE BANK AT
25%, HOW MUCH IS THE INTEREST IF SHE IS TO
DEFINITION

I N T E R ES T PAY THE LOAN FOR TWO YEARS?

PRINCIPAL, P
₱ 500,000 ₱ 500,000 P
.25 r
2 t
INTEREST

RATE, r
25%
%
TIME, t 250,000
2 years
SIMPLE

INTEREST, I
MRS. SANCHEZ
ORDINARY
& EXACT

THE SIMPLE INTEREST OF MRS.


SANCHEZ’S HOUSE LOAN IS ₱
250,000.
TITLE

AND
ORDINARY
Ordinary interest is computed
based on the assumption that the
year contains 360 days and each
DEFINITION

EXACT INTEREST month has 30 days.

Exact interest is computed


based on the assumption 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒅𝒂𝒚𝒔
that the year contains 365 Iₒ= Pr
𝟑𝟔𝟎
INTEREST

days.

𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒅𝒂𝒚𝒔
Iₑ= Pr
𝟑𝟔𝟓
SIMPLE
ORDINARY
& EXACT
TITLE

ORDINARY

AND
MRS. SANCHEZ APPLIES FOR A HOUSING
LOAN. IF SHE LOANED ₱ 500,000 AT THE
BANK AT 25%, HOW MUCH IS THE
DEFINITION

EXACT INTEREST ORDINARY AND EXACT INTEREST IF SHE


IS TO PAY THE LOAN FOR 425 DAYS?

ORDINARY
PRINCIPAL, P
₱ 500,000 Iₒ = ₱ 500, 000 x .25 x 425
INTEREST

360
RATE, r
Iₒ = ₱147,569.45
25%
% EXACT
SIMPLE

TIME, t
425 days Iₑ = ₱ 500, 000 x .25 x 425
365
INTEREST, I = ?
Iₑ = ₱145,547.95
ORDINARY
& EXACT
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