Prom Notes
Simple and Discount Interest
In financial transactions, interest is the amount paid by a borrower to a lender for the use of money over a period. Interest that is paid as a percent of amount borrowed or invested is called simple interest. The formula for simple interest is given by the following:
Simple Interest
Where,
Example
1. Suppose an amount Php 500.00 is invested for 2 years at 6% per year. How much is the earning of the investment after two years?
Solution:
The following can be obtained from the problem:,,.
. From this we conclude that, the investment earned Php60.00.
2. If Php4, 000.00 is borrowed at an annual interest rate of 16% for 9 months. How much is the interest due in borrowing the amount of money?
Solution:
Given :
,,.
. From this we conclude that, the interest due is Php480.00.
Sometimes if we are the investor, we consider the value of our investment after a given period. In this case we introduce the concept of future values or accumulated values.
Future Value
Where,
Present Value
P = F(1+rt)-1 OR P = F ÷ (1+rt)
Example
1. If Php4, 000.00 is borrowed at an annual interest rate of 16% for 0.75 years, what is the value of the investment after 0.75 years?
Solution:
Since the interest earned by the amount invested for 0.75 years is Php480.00, the value of Php4,000.00 after 0.75 years is Php4,480.00.
2. What is the simple interest rate applied if an investment of Php37,500 accumulates to Php45,937.00 in the period of 1.5 years?
Solution:
We note that the interest earned by the investment is Php8, 437, that is,. From the formula, we have
3. The repayment on a loan was Php12,100. If the loan was for 15 months at 16.8% interest a year, how much was the principal?
Solution:
Based from
In financial transactions, interest is the amount paid by a borrower to a lender for the use of money over a period. Interest that is paid as a percent of amount borrowed or invested is called simple interest. The formula for simple interest is given by the following:
Simple Interest
Where,
Example
1. Suppose an amount Php 500.00 is invested for 2 years at 6% per year. How much is the earning of the investment after two years?
Solution:
The following can be obtained from the problem:,,.
. From this we conclude that, the investment earned Php60.00.
2. If Php4, 000.00 is borrowed at an annual interest rate of 16% for 9 months. How much is the interest due in borrowing the amount of money?
Solution:
Given :
,,.
. From this we conclude that, the interest due is Php480.00.
Sometimes if we are the investor, we consider the value of our investment after a given period. In this case we introduce the concept of future values or accumulated values.
Future Value
Where,
Present Value
P = F(1+rt)-1 OR P = F ÷ (1+rt)
Example
1. If Php4, 000.00 is borrowed at an annual interest rate of 16% for 0.75 years, what is the value of the investment after 0.75 years?
Solution:
Since the interest earned by the amount invested for 0.75 years is Php480.00, the value of Php4,000.00 after 0.75 years is Php4,480.00.
2. What is the simple interest rate applied if an investment of Php37,500 accumulates to Php45,937.00 in the period of 1.5 years?
Solution:
We note that the interest earned by the investment is Php8, 437, that is,. From the formula, we have
3. The repayment on a loan was Php12,100. If the loan was for 15 months at 16.8% interest a year, how much was the principal?
Solution:
Based from