BUSINESS

MATHEMATICS
CHARLES NATHANIEL L. VALENCIA
DEFINITION OF TERMS
DEFINITION OF TERMS
• Lender or creditor–person (or institution) who invests the
money or makes the funds available
• Borrower or debtor –person (or institution) who owes the
money or avails of the funds from the lender
• Origin or loan date –date on which money is received by
the borrower.
• Repayment date or maturity date –date on which the
money borrowed or loan is to be completely repaid
 DEFINITION OF TERMS
• Interest (I)– amount paid or earned for the use of money
• Principal (P)– amount of money borrowed or invested on the origin
date
• Time or term (t)– amount of time in years the money is borrowed or
invested; length of time between the origin and maturity dates
• Rate(r)– annual rate, usually in percent, charged by the lender, or
rate of increase of the investment
• Maturity value or future value (F) –amount after t years that the
lender receives from the borrower on the maturity date
SIMPLE INTEREST
SIMPLE INTEREST

• It refers to the amount earned for one year calculated by

multiplying the principal by the interest rate.
• This kind of interest is applied for transactions that usually last
only for less than a year.
• Formula:
𝐼 = 𝑃𝑟𝑡
I = interest
P = principal, or the amount invested or borrowed
r = interest rate
t = term or time in years
SIMPLE INTEREST

• Example:
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?
SIMPLE INTEREST

• Example:
How much interest is charged when P50,000 is
borrowed for 9 months at an annual interest
rate of 10%?
MATURITY VALUE

𝑨=𝑷+𝑰
𝑨 = 𝑷 + 𝑷𝒓𝒕
𝑨 = 𝑷(𝟏 + 𝒓𝒕)
SIMPLE INTEREST

• Example:
An amount of ₱ 150 000 is invested for 9 months at 4%.
Find the:
a. Interest
b. Maturity value
SIMPLE INTEREST

• Example:
A dollar investment of $ 1 200 is transacted for 5 months
at 6%. Find the:
a. Interest
b. Maturity value
SIMPLE INTEREST
• Example:
Complete the table below by finding the
unknown.
Principal Rate Time Interest
(P) (r) (t)

(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)

SIMPLE INTEREST
• Example:
An amount of ₱ 1 000 000 is invested in a
financial institution.
a. How long will it take for the amount to reach ₱
1 001 000 at 2% simple interest?
b. At what interest rate will it earn ₱ 1 000 in 10
months?
SEATWORK
Unit 6 pages 21 – 22
Letter A no.’s 1,3,5
Letter B no.’s 12,14,16
Letter C no.’s 23,25,27 & 29
SEATWORK
Letter A no.’s 16. 1.09 years
1. ₱60 000 & ₱210 000 Letter C no.’s
3. ₱405 600 & ₱1 185 600 23. 2.5%
5. ₱36 000 & ₱156 000 25. 3.67%
Letter B no.’s 27. 6%
12. 0.04 years 29. 1.46%
14. 0.07 years
TERM: ORDINARY AND EXACT TIME

• Ordinary time is based on 30 – day month computation.

This means that a 6 – month transaction covers
(6)(30days) = 180 days.
• Exact time is based on the exact number of inclusive dates
of transaction. For instance, a loan entered on December
24, 2014 and matured on April 11, 2015 has 108 days.
TERM: ORDINARY AND EXACT TIME

• Example:
a. 90 days from September 8, 2014.
b. The number of days between February
8, 2015 and October 8, 2015
INTEREST: ORDINARY AND EXACT INTERESTS

Exact Time Ordinary Time

360 days
Ordinary Interest with exact time Ordinary interest with
(Banker’s Rule) ordinary time

365 days
Exact interest with
Exact interest with exact time
ordinary time
EXAMPLE

• You get a 180 – day ₱ 200 000.00 loan

from a bank at a 10.5% interest.
Calculate interest using (a) 360 – day
and (b) 365 – day year.
EXAMPLE

• Find the exact interest and the

ordinary interest given the following
values: ₱ 5 000 for 120 days at 5%.
EXAMPLE

• Mr. Seniro issued a promissory note on

May 8, 2015 to BPI amounting to
₱100,000 with interest at 6%. The due
date is October 8, 2015. Determine the
maturity value to be paid.
PRESENT VALUE

𝐴
𝑃=
1 + 𝑟𝑡
EXAMPLE

• Find the present value of a loan due

on December 24, 2014, with a
maturity value of ₱340,600 and a rate
of 6% in 159 days.
EXAMPLE

• On may 8, 2015, Mrs. Siega borrowed

₱100,000 from Mr. Singh at 6%
payable in 90 days. If this amount is
equivalent to 5% in a bank, find its
present value.
EXAMPLE

• On may 8, 2015, Mrs. Siega borrowed

₱100,000 from Mr. Singh at 6%
payable in 90 days. If this amount is
equivalent to 5.5% in a bank, find its
present value on July 16, 2015.
QUIZ
QUIZ
Answer each of the following:
1. Find:
a. 50 days from March 11, 2014
b. 150 days from December 7, 2016
2. Find the number of days between each set of dates:
c. June 12, 2016 to September 27, 2016
d. January 10, 2012 to May 11, 2012
QUIZ
3. Elaine invested ₱25 000.00 at 16% simple interest for 6 years.
a. How much interest will be earned?
b. What is the future value of the investment at the end of 6
years?
4. Find the amount due if ₱120 000.00 was invested at 10% for
160 days using:
a. ordinary interest
b. exact interest
QUIZ
5. On March 20, 2014, Mrs. Zulueta borrowed
₱250,000 from Mr. Kaur at 8% payable in
120 days. If this amount is equivalent to
7.5% in a bank, find its present value on May
20, 2014.