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Q2 W1 General Mathematics

The document discusses simple and compound interest concepts. It defines key terms like principal, interest rate, time period, maturity value, and provides formulas for calculating simple interest and compound interest. Examples are given to demonstrate calculating simple interest earned based on the principal, rate and time period. Compound interest is explained as interest calculated on both the principal and accumulated past interest. Formulas and an example are provided for compound interest calculations based on principal, rate, time and frequency of compounding.

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Samantha Manibog
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232 views39 pages

Q2 W1 General Mathematics

The document discusses simple and compound interest concepts. It defines key terms like principal, interest rate, time period, maturity value, and provides formulas for calculating simple interest and compound interest. Examples are given to demonstrate calculating simple interest earned based on the principal, rate and time period. Compound interest is explained as interest calculated on both the principal and accumulated past interest. Formulas and an example are provided for compound interest calculations based on principal, rate, time and frequency of compounding.

Uploaded by

Samantha Manibog
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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MATH OF INVESTMENTS

Learning Competencies:
At the end of this module, you should be able to:

a. illustrate simple and compound interests M11GM-iia-1;


b. distinguish between simple and compound interests M11GM-
iia-2;
c. compute interest, maturity value, future value, and present
value in simple interest and compound interest environment
M11GM-iia-b-1; and
d. solve problems involving simple and compound interests
M11GM-iib-2.
INTEREST
 It is the fee paid for borrowed money
Depositing money in
a savings account or
making a loan.

Borrow from a
bank or a friend.
Money cannot be borrowed all the time. Borrowing
money might be a crucial decision for someone who has a
certain needs and purposes.

How much does it cost to borrow money?


In this regard, the idea of paying interest
comes in. Paying interest is paying for the use of
money you borrowed under a certain circumstance.
This has been a part of human activities since time
immemorial. It has been regarded as legitimate
commercial practice of all people in different walks
of life. As an individual, it is essential to understand
how you can make your money works - a gain or a
loss in the lending and borrowing money industry.
Interest (I)
 It is the amount paid or earned for the use of money.

Simple Interest (Is)


 It is the interest that is computed on the principal and
then added to it.

Compound Interest (Ic)


 It is the interest is computed on the principal and on
the accumulated past interests.
Principal (P) –It is the amount of money borrowed or
invested on the origin date.

Rate (r) – It is the annual rate, usually in percent,


charged by the lender, or rate of increase of the
investment.

Time or Term (t) – It is the amount of time in years the


money is borrowed or invested, length of time between the
origin and maturity dates.
Maturity value or future value (F) – It is amount after t years
that the lender receives from the borrower on the maturity date.

Origin or loan date – It is the date on which money is received


by the borrower

Maturity date – It is the date on which the money borrowed, or


loan is to be completely repaid.

Lender o creditor – It is the person (or institution) that invests


the money or makes the funds available.

Borrower or debtor – It is the person (or institution) that


owes the money or avails of the funds from the lender.
 Simple interest is charged only on the loan amount called the
principal. Thus, interest on the interest previously earned is
not included.
 Simple interest is calculated by multiplying the principal by
the rate of interest by the number of the payment periods in
a year.
 

1. Orly invested
₱100 000.00 to an
account that pays a  
simple interest of 3%
annually. Find the interest
earned after 2 years.

 
 a. We are given , and year. Thus,
2. Teresa borrowed
₱120 000.00 from her Uncle
Tom. If Teresa agreed to pay
an 8% annual interest rate,
calculate the amount of  b.
We are given , and months or year.
interest she must pay if the Thus,
loan period is (a) 1 year, (b) 9
months, and (c) 18 months..
Find the interest earned after
2 years.
 c.We are given P = ₱120 000.00,r = 8%
or 0.08, and t = 18 months or year.
2. Teresa borrowed
Thus,
₱120 000.00 from her Uncle
Tom. If Teresa agreed to pay
an 8% annual interest rate,
calculate the amount of
interest she must pay if the
loan period is (a) 1 year, (b) 9
months, and (c) 18 months..
Find the interest earned after
2 years.
3. You get a student loan
from the an Educational
Assistance Foundation to
pay for your educational
expenses this year. Find the
interest on the loan if you
borrowed P15,000.00at 8%
for 1 year.
4. How much interest would
Maria pay to her loan
amounting to php 20,000 for
3 years
at 6% per year at simple
interest?
5. What is the interest
rate is being charge
if Mario applies a
loan amounting to
php 60,000.00and
pays interest of php
9,000.00 in 3 years
When the interest due at the end of a certain period is added
to the principal and that sum earns for the next period, the
interest paid is called compound interest.
Number of
Compounding Compound
Compounding
Frequency Interest Formula
per Year (n)
Annually
Annually 1
1
Semiannually 2
Semiannually 2
Quarterly 4
Quarterly 4
Monthly 12
Monthly
Daily 12
365

Daily 365
 
a. R = 8% = 0.08 and n= 4, then
1. If ₱320 000.00 is the number of compounding
invested for 5 years at 8% periods is
compounded quarterly,
find (a) the compound  

amount and (b) the


compounded interest.

The compound amount is ₱475 503.17.


 
b. Compound Interest
1. If ₱320 000.00 is
invested for 5 years at 8%  
compounded quarterly,
find (a) the compound
amount and (b) the
compounded interest.
  .
We need to find the principal P.
 Knowing that the compound amount is
A, and years
2. What amount must be
invested in order to have   𝐫 𝟐𝐭
 
P128 376.52 after 8 years (
𝐀 = 𝐏 𝟏+
𝟐 )
if money is worth 6%
 
compounded semi-
annually?
 

   

  .
𝟐𝐭
  𝐫
(
𝐀 = 𝐏 𝟏+
𝟐 )
3. Lauro deposited
₱64 600.00 in a savings
account which pays 8%
interest compounded semi-
annually. What will his
balance be in 4 years?

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