MATH OF INVESTMENT

HERYNADEL C. ADVINCULA
 Lesson Objectives
Define simple interest
Illustrate simple interest
Compute interest, maturity value,
future value, and present value in
simple interest environment
Solve problems involving simple
interest.
How are we
going to take
care of hard-
earned money ?
Buy only what you needs
What are some
way to take
care of hard-
earned money ?
 What are some
way to take
care of hard-
earned money ?

Try to save some money

 What are some
way to take
care of hard-
earned money ?

Invest some money

 What are some
way to take
care of hard-
earned money ?

Think of the future

 Converting Percent to Decimal
To convert a percent to decimal,
drop the percent sign and move the
decimal point two places to the left.

 
 
𝟏 .¿ 𝟏𝟐 % =𝟎 .𝟏𝟐   44 𝟎 . 𝟎𝟎𝟓
 

𝟏𝟐.%
 
   
 
2 𝟎 . 𝟎𝟑
   
5 𝟐
 

 
3 𝟎 .𝟏𝟎𝟓
 
 Percent Problem
 
Formula:
is the portion
is the rate
is the base(total amount)

 
Example:
rate base portion
 Percent Problem
 
Formula:
is the portion
is the rate
is the base(total amount)

Price of the bag discounted Discounted price

10 % 50
₱ 500
   

?
Base Rate Portion
 Percent Problem
 
Formula:
is the portion
is the rate
is the base(total amount)

Price of the shoes discounted Discounted price

1 6? % 240
 

₱ 1500
   

Base Rate Portion

 Percent Problem
 
Formula:
is the portion
is the rate
is the base(total amount)

Price of the book discounted Discounted price

? 3 0 % 225
 

₱ 750
   

Base Rate Portion

 Percent Problem
 
Formula:
is the portion
is the rate
is the base(total amount)

𝟏𝟖𝟕𝟓
 
1of  

 
2 𝟎 .𝟏𝟓 𝒐𝒓 𝟏𝟓 %
 

 
3is of what number 𝟗𝟖𝟓
 

 
4of is 𝟏𝟎𝟏𝟓
 

 
5is 25 of what number 𝟗𝟎
 
 Interest () - the money paid for the use of
 

money
 Principal () - the original sum of money
 

borrowed in a loan, or put into an

investment.
 Rate of interest ()- annual rate, usually in percent, charged by
 

the lender, or rate of increase of the investment.

 Time – amount of time in years the money is borrowed or

invested.
Formula:
𝐼 =𝑃𝑟𝑡
 

     
(a) (b) (c)
𝑰
 

𝑷 𝒓 𝒕
       
Where
How much interest is charged when  
𝑰
P50,000 is borrowed for 1 year at  
𝑷  𝒓  𝒕
an annual simple interest rate of
10%
𝐼 =𝑃𝑟𝑡
 

𝐼 =(50,000)(0.1)(1)
 

 
50,000 𝐼 =5,000
 
 
1
 
10% or 0.1
Teresa borrowed P120,000 from her uncle. If  
𝑰
Teresa agreed to pay an 8% annual interest  𝑷  𝒓  𝒕
rate, calculate the amount of interest she
must pay if the loan period is (a) 1 year, (b) 9
months and (c) 18 months.
𝐼 =𝑃𝑟𝑡 𝐼 =(120,000)(0.08)(1)
   

𝐼 =9,600
 
 
120,000
 
8% or 0.08
 
Teresa borrowed P120,000 from her uncle. If  
𝑰
Teresa agreed to pay an 8% annual interest  𝑷  𝒓  𝒕
rate, calculate the amount of interest she
must pay if the loan period is (a) 1 year, (b) 9
months and (c) 18 months.

𝑰 =𝑃𝑟𝑡
   
Note:
𝑰
 
 
120,000 When the time expressed in
=(120,000)(0.08)(0.75)
𝑰 =7,200
    months (, it should be converted to
8% or 0.08
 
or years by
Teresa borrowed P120,000 from her uncle. If  
𝑰
Teresa agreed to pay an 8% annual interest  𝑷  𝒓  𝒕
rate, calculate the amount of interest she
must pay if the loan period is (a) 1 year, (b) 9
months and (c) 18 months.
𝑰 =𝑃𝑟𝑡 𝑰 =(120,000)(0.08)(1.5)
   

𝑰 =14,400
   
120,000
 
8% or 0.08
 
or
When invested at an annual interest rate of  
𝑰
7%, an amount earned ₱11,200 of simple  
𝑷  𝒓  𝒕
interest in two years. How much money was
originally invested?
   

 
7% or 0.07  

 
𝑰=11,200
 
𝒕 =2
 
𝑷=80000
If Php13,800 is invested at 5.5%  
𝑰
simple interest, how long will it  
𝑷  𝒓  𝒕
take to grow an interest of
Php3,036 ?
   

 
𝑷=13800
 
𝒕 =4
 
5.5% or 0.055
 
𝑰 =3036
  
Maturity value or future value -amount
after t years; that the lender receives from the
borrower on the maturity date

𝟓/𝟔
 

Borrow Pay
5000 +¿ 1000 ¿ 6 000
         

Principal interest
Maturity value
 
Maturity value or future value -amount
after t years; that the lender receives from the
borrower on the maturity date
 
Maturity Value or Future value ()
or
where
What is the maturity value
 
Maturity Value or
of a loan amounting to Future value ()
Php25,000 borrowed at 8% 1.
2.
for 1 years?
 
𝑰
 
𝑷  𝒓  𝒕
What is the maturity value
 
Maturity Value or
of a loan amounting to Future value ()
Php25,000 borrowed at 8% 1.
2.
for 1 years?
 
𝐴=𝑃(1+𝑟𝑡 )
 
𝐴=25000(1+ ( 0.08 ) ( 1 ) )
 
𝐴=25000(1+0.08)
 
𝐴=25000(1.08)
 
𝐴=27000
To buy the school supplies for the coming
school year, you get a summer job at a resort.  
𝑰
Suppose you save ₱4,200.00 of your salary  
𝑷  𝒓  𝒕
and deposit it into account that earns simple
interest. After 9 months, the balance is
₱4,263.00. What is the annual interest rate?
   

 
₱4,200.00  
𝒓=0.02∨2 %
or
 
𝑰 =4,263− 4,200=63
To buy the school supplies for the coming
school year, you get a summer job at a resort.
Suppose you save ₱4,200.00 of your salary
and deposit it into account that earns simple
interest. After 9 months, the balance is
₱4,263.00. What is the annual interest rate?
 
Maturity Value or Future value ()
or
where
Ordinary Interest or Banker's
Interest – interest based on a 360-
day year.

Exact Interest – interest based on a

365-day year
Sample 1
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.
1. Find the amount of interest earned if Php
150,000 was invested at 8% interest for 140
days using the ordinary interest.

2. )What is the maturity value of a loan

amounting to Php20,000 borrowed at 7% for 2
years?