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Republic of the Philippines

State Universities and Colleges


ILOILO STATE COLLEGE OF FISHERIES-SAN ENRIQUE CAMPUS
San Enrique, Iloilo
Mathematics of Finance

Simple Interest
Interest is a charge for a borrowed money, generally of the amount
borrowed. It can be earned from a deposit or charged against a loan. The original
amount deposited, loaned or borrowed amount is called the principal (P). The
percentage charge or earned from a principal is the rate of interest (r). The rate is
expressed as a decimal number or a fraction. The period the money was deposited or
length is the time (t), the length of time is expressed in years.

THE SIMPLE INTEREST FORMULA


I= Prt
Where I = Simple Interest
P = Principal Amount
r = interest rate per period of time
t = time
To find the rate, time and the principal, use the following formulas:
𝐼 𝐼 𝐼
r= t= P=
𝑃𝑡 𝑃𝑟 𝑟𝑡

When an interest is added to the principal amount, the total sum is called the amount
(F) or the maturity value.
F= P + I
Since I = Prt
F = P + Prt
F= P (1 + rt)
EXAMPLES:
1. Young Nian deposited ₱ 7,000 in a rural bank at 5% simple interest for 3 years. How
much will she earn after 3 years.
Given: P = ₱ 7,000, r= 5% or 0.05, t= 3 years, I=?
Solution:
I= Prt
I= (₱ 7,000) (0.05) (3)
I= ₱ 1,050
Republic of the Philippines
State Universities and Colleges
ILOILO STATE COLLEGE OF FISHERIES-SAN ENRIQUE CAMPUS
San Enrique, Iloilo

2. He Xin borrowed ₱ 12,500 from her friend Xia. She promised to pay it after 6 months
at 3%. How much will she pay after 6 months?
Given: P = ₱12,500, r= 3% or 0.03, t= 12 months (0.5 years), F=?
Solution:
F= P + I
I= (₱12,500) (0.03) (0.5)
I= ₱ 187.50
F= ₱12,500 + ₱187.50
F= ₱12,687.50
3. If Mrs. Xia borrowed ₱ 57,500 from a bank at 9.5% simple interest, how much will
she pay at the end of 18 months?
Given: P = ₱ 57,500, r= 9.5% or 0.095, t= 18 months (1.5 years), F=?
Solution:
F= P (1 +rt)
F= ₱ 57,500 (1+ (0.095) (1.5))
F= ₱ 65,693.75
4. Mr. Lin paid ₱ 4,800 interest at 10.5 % for a 5-year loan. What was the original loan?
Given: I = ₱ 4,800, r= 10.5% or 0.105, t= 5 years, P=?
Solution:
𝐼
P= 𝑟𝑡
₱ 4,800
P= (0.105)(5)

P= ₱ 9,142.86
5. Ponching merchandise borrowed ₱ 100,00 from a certain bank. If the bank charged
₱ 6,800 interest for the use of its money for the period of 1 year, what was the interest
rate for this period?
Given: P= ₱ 100,000, I= 6,800, t= 1 year, r=?
Republic of the Philippines
State Universities and Colleges
ILOILO STATE COLLEGE OF FISHERIES-SAN ENRIQUE CAMPUS
San Enrique, Iloilo
Solution:
𝐼
r= 𝑃𝑡
₱ 6,800
r= (₱ 100,000)(1)

r= 0.68 x 100%
r= 6.8 %
6. How many years will it take for ₱ 25,000 to earn ₱ 1,250 if it is invested at 8%
simple interest?
Given: P= ₱ 25,000, I= 1,250, r= 8 % or 0.08, t=?
Solution:
𝐼
t= 𝑃𝑟
₱ 1,250
t= (₱ 25,000)(0.08)

t= 0.625 years
7. How much was borrowed if the interest at 1% after 3 months is ₱ 200?
Given: I= ₱ 200, r= 1 % or 0.01, t= 3 months (0.25 years) P=?
Solution:
𝐼
P=
𝑟𝑡
₱ 200
r= (0.01)(0.25

P= ₱ 80,000

Exercises: Answer the following problems. Show your complete solution.


1. Miao miao borrowed ₱ 10,000 from a cooperative. She paid ₱ 1,700 interest for 6
months. At what rate was interest charged?
2. Find the simple interest and amount on ₱ 120,000 at 2.5% for 10 years.
3. Kaituo deposited ₱ 18,500 in a bank at 7% interest per annum. How much will he
expect to withdraw at the end of 3 ½ years?
4. How much interest is charged on a ₱ 22,000 loan from a friend for 5 years at 9%
simple interest?
5. Kuanlin borrowed ₱ 30,000 from Jinmai who charged 18% interest rate. How much
would she pay Jinmai after 6 months?

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