Simple Interest

Annual Simple Interest

Is = P rt

where Is =simple interest, P = principal, r = rate, t = term or time, in years

EXAMPLE 1.A bank offers 0.25% EXAMPLE 2. How much interest is EXAMPLE 3. Complete the table below
annual simple interest rate for a charged when P50,000 is borrowed for by finding the unknown
particular deposit. How much 9 months at an annual simple interest Principal Rate Time Interest
interest will be earned if 1 million rate of 10%? (P) (r) (t) (Is)
pesos is deposited in this savings Solution:
account for 1 year? Given: P = 50,000 (a) 2.5% 4 1,500
Solution: r = 10% = 0.10
Given: P = 1,000,000 t = 9/12 year = 0.75 year 36,000 (b) 1.5 4,860
r = 0:25% = 0:0025 Find: Is 250, 000 0.5% (c) 275
t = 1 year Note: When the term is expressed in
Find: Is months (M), it should be converted to
500,000 12.5% 10 (d)
Is = Prt years by t =M/12.
Is = (1,000,000)(0.0025)(1) Is = Prt
Is = 2,500 Is = (50,000)(0.10)(9/12)
Solution..
The interest earned is P2,500 Is = (50,000)(0.10)(0.75)
(a) The unknown principal can be
Is = 3,750
obtained by P = Is/rt
The simple interest charged is P 3,750.
P = 1,500/(0.025)(4)
P = 15,000
(b) The unknown rate can be computed
by r =Is/Pt
r = 4,860/(36,000)(1,5)
r = 0.09 = 9%
(c) The unknown time can be calculated
by t = Is/Pr
t = 275/(250,000)(0.005)
t = 0.22 years
(d) The unknown simple interest is
given by Is = Prt
Is = (500,000)(0.125)(10)
Is = 625; 000

Activity: Answer the following problems. (5 points each)

1. When invested at an annual
interest rate of 7% , an amount
earned P11,200 of simple interest in
two years. How much money was
originally invested?
2. If an entrepreneur applies for a
loan amounting to P500,000 in a
bank, the simple interest of which is
P157,500 for 3 years, what interest
rate is being charged?
3. Teresa borrowed P120,000 from
her uncle. If teres agreed to pay an
8% annual interest rate, calculate the
amount of interest she must pay if
loan period is (a) 1 year, (b) 9
months, and (c) 18 months.

4. At what simple interest rate was 5. Find the interest earned after 3 6. To save money, Stan Wright
P16,500 invested if it earned an years if P12,000 is deposited in a invested P2,500 for 45 months ate
interest of P1,620 just after 1.5 savings account which earns 5% 3.5% simple interest. How much
years? simple interest. interest did he earn?