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Simple Interest

Quick Question

"What is
interest?”
2
Quick Question

"What is a
Simple Interest?”
3
Definition of Simple Interest

▰ Simple Interest (Is) - interest


that is computed on the principal
and then added to it
4
Important Formula
𝑰𝒔 =P*r*t
Where:
𝑰𝒔 = 𝑺𝒊𝒎𝒑𝒍𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
𝑷 = 𝑷𝒓𝒊𝒏𝒄𝒊𝒑𝒂𝒍
𝒓 = 𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑹𝒂𝒕𝒆
𝒕 = 𝑻𝒊𝒎𝒆(𝒊𝒏 𝒚𝒆𝒂𝒓𝒔) 5
Example 1

▰ A bank offers 0.25% annual simple


interest rate for a particular deposit.
How much interest will be earned if
1 million pesos is deposited in this
savings account for 1 year? 6
Solution 1

Required:
Given:
▰ 𝒓 = 𝟎. 𝟐𝟓%

▰ 𝑷 = 𝟏, 𝟎𝟎𝟎, 𝟎𝟎𝟎
▰ 𝑰𝒔 =?
▰ 𝒕 = 𝟏 𝒚𝒆𝒂𝒓
7
Solution 1

“First step is to Formula: 𝑰𝒔 =P∗r∗t


convert the rate
𝑰𝒔 =1,000,000∗0.0025∗1
into a decimal”
𝟎. 𝟐𝟓 ÷ 100
=0.0025 𝑰𝒔 =2,500
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Conclusion 1

“The Simple Interest earned is


₱ 2,500.00”
9
Example 2

▰ Juan invest ₱50,000 in a bank


for 2 years at a 3% annual
interest rate. What is the
interest Juan earned after this
time? 10
Solution 2

Required:
Given:
▰ 𝒓 = 𝟑%

▰ 𝑷 = 𝟓𝟎, 𝟎𝟎𝟎
▰ 𝑰𝒔 =?
▰ 𝒕 = 𝟐 𝒚𝒆𝒂𝒓𝒔
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Solution 2

“First step is to Formula: 𝑰𝒔 =P∗r∗t


convert the rate
𝑰𝒔 =50,000∗0.03∗2
into a decimal”
𝑰𝒔 =1,500∗2
𝟑 ÷ 100
=0.03 𝑰𝒔 =3,000
12
Conclusion 1

“Juan earned a simple interest


of ₱ 3,000.00”
13
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14
Exercise 1

▰ ₱10,000 is invested at two years


in a bank, earning a simple
interest rate of 8% per annum.
▰ Determine the simple interest
earned. 15
How about if we
have a term that is
NOT expressed in
years?
16
Example 3

▰ How much interest is charged


when ₱50,000 is borrowed for
9 months at an annual simple
interest rate of 10%? 17
Solution 3

Required:
Given:
▰ 𝒓 = 𝟏𝟎% 𝒐𝒓 𝟎. 𝟏

▰ 𝑷 = 𝟓𝟎, 𝟎𝟎𝟎
▰ 𝑰𝒔 =?
▰ 𝒕 = 𝟗 𝒎𝒐𝒏𝒕𝒉𝒔
18
Solution 3

“First step is to Formula:𝐭 = 𝒎𝒐𝒏𝒕𝒉 ÷ 𝟏𝟐


convert months to 𝟗
years by using the 𝒕=
formula” 𝟏𝟐
𝒎𝒐𝒏𝒕𝒉 ÷ 𝟏𝟐
=time or term 𝒕 = 𝟎. 𝟕𝟓 𝒚𝒆𝒂𝒓𝒔
19
Solution 3

Formula: 𝑰𝒔 =P∗r∗t
𝑰𝒔 =50,000∗0.1∗0.75
𝑰𝒔 =5,000∗0.75
𝑰𝒔 =3,750
20
Conclusion 3

“The simple interest charged is


₱ 3,750.00”
21
Example 4

▰ ₱100,000 is invested for 2


years and 6 months in a bank
earning a simple interest rate
of 10% per annum. How much
is the interest? 22
Solution 4

Required:
Given:
▰ 𝒓 = 𝟏𝟎% 𝒐𝒓 𝟎. 𝟏

▰ 𝑷 = 𝟏𝟎𝟎, 𝟎𝟎𝟎
𝑰 =?

𝒔
▰ 𝒕 = 𝟐 𝒚𝒆𝒂𝒓𝒔 𝒂𝒏𝒅 𝟔 𝒎𝒐𝒏𝒕𝒉𝒔
23
Solution 3

“First step is to convert Solution:


months to years then add 𝟔
𝒕=
the years” 𝟏𝟐
(𝒎𝒐𝒏𝒕𝒉 ÷ 𝟏𝟐) + 𝒚𝒆𝒂𝒓 𝒕 = 𝟎. 𝟓
𝒕 = 𝟐 + 𝟎. 𝟓
𝒕 = 𝟐. 𝟓 𝒚𝒆𝒂𝒓𝒔
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Solution 3

Formula: 𝑰𝒔 =P∗r∗t
𝑰𝒔 =100,000∗0.1∗2.5
𝑰𝒔 =10,000∗2.5
𝑰𝒔 =25,000
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Conclusion 3

“The simple interest earned is


₱ 25,000.00”
26
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27
Exercise 2

▰ ₱25,999 is invested for 3 years


and 9 months in a bank earning
a simple interest rate of 2.5%
per annum. 28
How about it the
unknown is the
principal, rate, or
time?
29
Remember the Formula

𝑰𝒔 =P*r*t
Where:
𝑰𝒔 = 𝑺𝒊𝒎𝒑𝒍𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
𝑷 = 𝑷𝒓𝒊𝒏𝒄𝒊𝒑𝒂𝒍
𝒓 = 𝑨𝒏𝒏𝒖𝒂𝒍 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑹𝒂𝒕𝒆
𝒕 = 𝑻𝒊𝒎𝒆(𝒊𝒏 𝒚𝒆𝒂𝒓𝒔) 30
Shortcut
Cover what
𝑰𝒔 is being
required and
÷ what is left
is the

𝑷 𝒓 𝒕
× × formula
31
Example 5

▰ Complete the table by finding the unknown.


Principal
Rate (r) Time (t) Interest (Is)
(P)
1.) _______ 2.5% 4 1,500
36,000 2.) _______ 1.5 4,860
250,000 0.5% 3.) _______ 275
500,000 12.5% 10 4.) _______ 32
Solution 5.1
𝑰𝒔
Solution: 𝑷 =
Given: (𝒓)(𝒕)
▰ 𝒓 = 𝟐. 𝟓% 𝒐𝒓 𝟎. 𝟎𝟐𝟓 𝟏, 𝟓𝟎𝟎
𝑷=
▰ 𝒕 = 𝟒 𝒚𝒆𝒂𝒓𝒔 (𝟎. 𝟎𝟐𝟓)(𝟒)
▰ 𝑰𝒔 = 𝟏, 𝟓𝟎𝟎 𝟏, 𝟓𝟎𝟎
𝑷=
Required: 𝟎. 𝟏
▰ 𝑷 =? 𝑷 = 𝟏𝟓, 𝟎𝟎𝟎
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Solution 5.2
𝑰𝒔
Solution: 𝒓 =
Given: (𝑷)(𝒕)
▰ 𝑷 = 𝟑𝟔, 𝟎𝟎𝟎
𝟒, 𝟖𝟔𝟎
𝒓=
▰ 𝒕 = 𝟏. 𝟓 𝒚𝒆𝒂𝒓𝒔 (𝟑𝟔, 𝟎𝟎𝟎)(𝟏. 𝟓)
▰ 𝑰𝒔 = 𝟒, 𝟖𝟔𝟎 𝟒, 𝟖𝟔𝟎
𝒓=
Required: 𝟓𝟒, 𝟎𝟎𝟎
▰ 𝒓 =? 𝒓 = 𝟎. 𝟎𝟗 𝒐𝒓 𝟗%
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Solution 5.3
𝑰𝒔
Solution: 𝒕 =
Given: (𝑷)(𝒓)
▰ 𝑷 = 𝟐𝟓𝟎, 𝟎𝟎𝟎
𝟐𝟕𝟓
𝒕=
▰ 𝒓 = 𝟎. 𝟓% 𝒐𝒓 𝟎. 𝟎𝟎𝟓 (𝟐𝟓𝟎, 𝟎𝟎𝟎)(𝟎. 𝟎𝟎𝟓)
▰ 𝑰𝒔 = 𝟐𝟕𝟓 𝟐𝟕𝟓
𝒕=
Required: 𝟏𝟐𝟓𝟎
▰ 𝒕 =? 𝒕 = 𝟎. 𝟐𝟐 𝒚𝒆𝒂𝒓𝒔
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Solution 5.4
Solution:𝑰𝒔 = (𝑷)(𝒓)(𝒕)
Given:
▰ 𝑷 = 𝟓𝟎𝟎, 𝟎𝟎𝟎 𝑰𝒔 = (𝟓𝟎𝟎, 𝟎𝟎𝟎)(𝟎. 𝟏𝟐𝟓)(𝟏𝟎)
▰ 𝒓 = 𝟏𝟐. 𝟓% 𝒐𝒓 𝟎. 𝟏𝟐𝟓
▰ 𝒕 = 𝟏𝟎 𝒚𝒆𝒂𝒓𝒔 𝑰𝒔 = (𝟔𝟐, 𝟓𝟎𝟎)(𝟏𝟎)
Required:
▰ 𝑰𝒔 =? 𝑰𝒔 = 𝟔𝟐𝟓, 𝟎𝟎𝟎
36
Example 6

▰ When invested at an annual


interest rate of 7%, the amount
earned is ₱11,200 of simple
interest in two years. How much
money was originally invested? 37
Solution 6
𝑰𝒔
Solution: 𝑷 =
Given: (𝒓)(𝒕)
▰ 𝑰𝒔 = 𝟏𝟏, 𝟐𝟎𝟎
𝟏𝟏, 𝟐𝟎𝟎
𝑷=
▰ 𝒓 = 𝟕% 𝒐𝒓 𝟎. 𝟎𝟕 (𝟎. 𝟎𝟕)(𝟐)
▰ 𝒕 = 𝟐 𝒚𝒆𝒂𝒓𝒔 𝟏𝟏, 𝟐𝟎𝟎
𝑷=
Required: 𝟎. 𝟏𝟒
▰ 𝑷 =? 𝑷 = 𝟖𝟎, 𝟎𝟎𝟎
38
Conclusion 6

“The amount invested is


₱ 80,000.00”
39
Example 7

▰ 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?
40
Solution 7
𝑰𝒔
Solution: 𝒓 =
Given: (𝑷)(𝒕)
▰ 𝑷 = 𝟓𝟎𝟎, 𝟎𝟎𝟎
𝟏𝟓𝟕, 𝟓𝟎𝟎
𝒓=
▰ 𝒕 = 𝟑 𝒚𝒆𝒂𝒓𝒔 (𝟓𝟎𝟎, 𝟎𝟎𝟎)(𝟑)
▰ 𝑰𝒔 = 𝟏𝟓𝟕, 𝟓𝟎𝟎 𝟏𝟓𝟕, 𝟓𝟎𝟎
𝒓=
Required: 𝟏, 𝟓𝟎𝟎, 𝟎𝟎𝟎
▰ 𝒓 =? 𝒓 = 𝟎. 𝟏𝟎𝟓 𝒐𝒓 𝟏𝟎. 𝟓%
41
Conclusion 6

“The bank charged an annual


interest rate of 10.5%”
42
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43
Quiz

▰ Complete the table by finding the unknown.


Principal (P) Rate (r) Time (t) Interest (Is)
2,000 5% 3 1.) _______
2.) _______ 12% 5 20,000
88,000 3.) _______ 4 8,000
500,000 9.5% 4.) _______ 285,000
1,000,000 0.5% 12 5.) _______ 44
THANKS!

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