Definition of Terms

Interest (I)
A benefit in the form of a fee that lender received for
letting borrower use of his money
Origin Date (O.D.)
The date on which the borrowed
money is received by the
borrower
Maturity Date (M.D.)
Or repayment date, the date on
which the loan (borrowed
money) is completely repaid.
Definition of Terms
Term of the Loan (t)
The length of time from the origin date to the maturity date
 Simple Interest (I)
INTEREST that is computed based ONLY on the original
amount of money received by the borrower on the origin
date and is added to this amount on maturity date.
Simple Interest is dependent on 3 factors

1. Principal (P)
The amount of money borrowed or sum receive
by the borrower on O.D. (in currency)
2. Simple Interest Rate (r)
Agreed annual rate of interest
(in percentage %)
3. Term of Loan (t)
Time in years
A type of interest wherein only the original principal earns
interest for the duration of the term.
Maturity Value or Final Amount (F)
The amount of money received by the lender at the end
of the term; the sum of the principal (P) and the simple
interest (I) earned.
F=P+I
F = P + Prt
F = P(1 + rt)
Principal P Maturity value F

Origin date Maturity date

Term
 Example 1
Find the amount if P800,000 is invested for 2
years at simple interest rate of 14.4% per year.
What is the interest earned?
 Example 2
In how much time will P28,000 amount to
P29,134 at 16.2% simple interest rate?
 Example 3
At what simple interest rate will a sum double
itself in 15 years?
 Example 4
What principal will amount to P16,856.10 in 2
years at 10.8% simple interest rate?
 Example 5
Find the amount if P10,000 is invested for 10
months at 5.04% simple interest rate?
 Example 5
Find the amount if P10,000 is invested for 10
months at 5.04% simple interest rate?

NOTE: If time t is given in months, then it has to

be converted to years.
 Example 6
Find the amount if P8,000 is invested for 250
days at 14% simple interest rate by using
a. ordinary interest b. exact interest
NOTE: If time t is given in days D, then it has to be
converted to years and this leads to 2 types of interest.
t = (D/360) years gives ordinary interest (default)
t = (D/365) years gives exact interest
NOTE:
If term is given in terms of origin date and
maturity date, then we get Actual time.
That is, we count everyday within the term of
the loan except the origin date.
Jan, Mar, May, Jul, Aug, Oct, Dec – 31 days

Apr, Jun, Sep, Nov – 30 days

Feb – 28 days ; 29 days for leap year

 Note that February has 29 days
if it falls on a leap year and a
leap year is a year divisible
by 4. Dec
Oct
May
Mar
We can use our knuckles Nov
as guide in remembering Sep Apr Jun
the number of days for Feb Jul
the different months Aug
of the year. Jan

Months that fall on knuckles

have 31 days while months
that fall in between knuckles
have 30 days except February
which has 28 days.
 Time Factors
1. Ordinary Interest (Banker’s Rule) (default)
t = (actual time/360)
2. Exact Interest
t = (actual time/365)

If the day of the dates (O.D. & M.D.) coincide with one
another or are the same, then we count in MONTHS.
 Example 7
Find the amount of P10,000 due on December
15, 2015 if it was invested last March 15, 2015
at 4.03% simple interest rate?
 Example 8
Find the maturity value of P18,000 if it was
invested from Feb. 10, 2017 to Apr 16, 2018 at
15% simple interest rate using i) Banker’s rule
ii) exact interest .
 Example 9
A 5-year investment had a maturity value of
P27,500. If the applied rate was 7.5% simple
interest, what was its present value?
 Example 10
At 14% simple interest, find the present value
of P9112.50 due in 30 months.
 Example 11
To pay a debt, Pong offered Bert P1000 now or
P1100 three months from now. If saving
account interest is 10%, what offer will give
greater return for Bert?
 Example 12
Find the present value of P100,000, which is an
amount due in 200 days, if money's worth is
10.5% simple interest.
 Example 13
Susan lends P50,000 to Jane on October 1,
2014. She expects Jane to pay the principal
and simple interest at 9% to fully settle the debt
on March 28, 2015. What amount does Susan
receive?
 Example 14
Accumulate Php85,000 for 20 months at a
simple interest rate of 12%.
(Note: To accumulate an amount means to find
its maturity value.)
 Example 15
At what simple interest rate will P415,000 be
the present value of P500,000 for a three years
and 4 months transaction?
 Example 16
When will Php42,000 earn simple interest of
P8000 if it is invested at 11.4%?