NAME: ________________________________________________

DATE: ____________

SIMPLE INTEREST
Reasons for borrowing:
1. ____________________________________________________________
2. ____________________________________________________________
3. ____________________________________________________________
4. ____________________________________________________________

INTEREST - _______________________________________________________

TWO KINDS OF INTEREST

A. SIMPLE INTEREST
An interest computed on the amount the borrower ___________ at the time the loan is obtained
and is ____________________ to that amount when the loan becomes due.
Simple interest is computed ____________________ for the entire time or period of the loan. At
the end of the time period, the borrower repays the amount originally owed plus the interest.

B. COMPOUND INTEREST - ________________________________________.

It is an interest computed more than once during the time period of the loan.
Finding the simple interest
Interest

Pricipal x Rate x Time

PRT

____________________ is the amount received by the borrower on the loan date.

_______________ expressed as a percentage, is converted to a decimal for computation purposes.

____________________ expressed in years or fractional part of a year is the period between the
____________________ - the date when the loan was obtained and;
____________________ - the date when the loan becomes due.

1 BM 1 - SIMPLE INTEREST

NAME: ________________________________________________

DATE: ____________

Sample Problems
1. Luz Clarita borrowed P280,000 at a simple interest rate of 9% for one year. Compute for the
simple interest and maturity value of the loan.
Interest

Principal x Rate x Time

Interest

280,000 x

Interest

________

0.09 x 1

Finding the Maturity Value

After one year, Luz Claritas loan matures and she is obliged to pay the maturity value of the loan.
This is the sum of the principal she received on loan date and the interest. In formula,
Maturity Value
MV

Principal + Interest

P + I

Maturity Value

280,000 + ________

Maturity Value

________

FINDING THE MATURITY VALUE WITHOUT COMPUTING THE INTEREST

Maturity Value
MV

Principal + Interest

Principal + (Principal x Rate x Time)

M V = Principal (1 + Rate x Time)

MV

280,000 (1 + 0 .09 x 1)

Maturity Value

280,000 (1 + .09)

Maturity Value

280,000 (1.09)

Maturity Value

________

Two kinds of Simple Interest

____________________, uses 365 days as the time denominator.
____________________, uses 360 days as the time denominator.
*Note that the exact interest method uses 366 days in a leap year.*

2 BM 1 - SIMPLE INTEREST

NAME: ________________________________________________

DATE: ____________

2. If Esperanza borrowed P140,000 at 7% interest for 64 days, how much would the interest be
using the exact and ordinary interest methods?

Exact Interest Method

Interest

Interest

Interest

Principal x Rate x Time

140,000 x 0.07 x

64
365

________

Ordinary Interest Method

Interest

Interest

Interest

Principal x Rate x Time

140,000 x 0.07 x

64
360

________

The Concept of Time

____________________ is determined by counting every day excluding the loan date until the
maturity date.
____________________ is determined by assuming that each month has 30 days.

3. Count the actual time and approximate time from

April 8, 1998 to September 20, 1998.

Actual Time

Approximate Time

April

____

April

____

May

____

May

____

June

____

June

____

July

____

July

____

August

____

August

____

3 BM 1 - SIMPLE INTEREST

NAME: ________________________________________________
September

____

September

____

DATE: ____________
____
____

5. Applying the four time combination above, compute for the interest if Esperanza was lent
P122,500 at 11% interest.
Exact interest using actual time
Interest

Interest

Interest

Principal x Rate x Time

122,500 x 0.11 x

165
365

________

Exact interest using approximate time

Interest

Interest

Interest

Principal x Rate x Time

122,500 x 0.11 x

162
365

________

Ordinary interest using actual time

Interest

Interest

Interest

Principal x Rate x Time

122,500 x 0.11 x

165
360

________

Ordinary interest using approximate time

Interest

Interest

Principal x Rate x Time

4 BM 1 - SIMPLE INTEREST

122,500 x 0.11 x

162
360

NAME: ________________________________________________
Interest

DATE: ____________

__________

Based on the value of interest at different combinations __________________________ is the

most favorable since it yielded the __________ interest.

_______________________ - Ordinary interest using actual time.

Manipulating the Simple Interest formula:

A. Principal is unknown
5. A bank loaned Fashion Boutique money at 8% simple interest for 90 days. If the amount of
interest was P4,000, use the ordinary interest method to find the amount of principal borrowed.

Principal=

interest
rate x time

Principal

4 ,000
90
0. 08 x
360

___________

B. Rate is unknown
6. If Fashion Boutique applies for a P175,000 loan in a bank the interest of which is P5,810 for 125
days, what interest rate is being charged? Use the ordinary interest method.
Rate

interest
principal x time

5 , 810
Rate

Rate

175 , 000 x

___________

C. Time is unknown

5 BM 1 - SIMPLE INTEREST

125
360

NAME: ________________________________________________

DATE: ____________

When the time T is missing, a whole number in the answer represents _____________ and the
decimal represents a ____________________. The decimal should be converted to days by
____________________ it by 360 for ordinary interest or by 365 for exact interest.
7. What would be the time period of Fashion Boutiques loan for P266,000, at 11% ordinary
interest, if the amount of interest is P10,150?

Time

interest
principal x rate

Time

10 , 150
266 ,000 x 0 .11

= ___________

BANK DISCOUNT

An interest computed on the maturity value of the loan and is ____________________ from the
amount at loan date to determine the next amount to be ____________________ by the borrower.
____________________ the amount applied for by the borrower on loan date.
__________________________
computation purposes.

- expressed as percentage, is converted to decimal for

_______________- expressed in years or fractional part of the year, is the period between the loan
and the maturity value.

Bank discount = maturity value x discount rate x time

BD = MV x R x T

PROCEEDS = MV BD

6 BM 1 - SIMPLE INTEREST

NAME: ________________________________________________

DATE: ____________

Mira sol availed of a P245, 000 loan at 14% discount rate for 9 months. Find the bank discount and
proceeds of the loan.
BD

PROCEEDS

245, 000 x 0.14 x

___________

___________

7 BM 1 - SIMPLE INTEREST

9
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