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Basic Business Mathematics

The document provides an overview of basic concepts in business mathematics, including simple and compound interest, time between dates, promissory notes, and examples of calculating interest. Simple interest refers to interest calculated only on the principal amount, while compound interest calculates interest on prior interest amounts. The document explains the concepts and provides examples to illustrate calculations of simple and compound interest.

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Justine Francisco
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281 views49 pages

Basic Business Mathematics

The document provides an overview of basic concepts in business mathematics, including simple and compound interest, time between dates, promissory notes, and examples of calculating interest. Simple interest refers to interest calculated only on the principal amount, while compound interest calculates interest on prior interest amounts. The document explains the concepts and provides examples to illustrate calculations of simple and compound interest.

Uploaded by

Justine Francisco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BUSINESS

MATHEMATICS
Basic Business Mathematics
BUSINESS MATHEMATICS
Business mathematics is mathematics used by commercial
enterprises to record and manage business operations. It is used by
commercial institutions in making their system work. Business
mathematics has vast applications in the areas of accounting,
inventory management, marketing, sales projection, market analysis,
and many more. Some of the basic concepts of business mathematics
are: interest, stocks and bonds, and loans.
SIMPLE AND
COMPOUND
INTERESTS
Interest
 it is the amount paid for the use of
another amount of money. It is usually
expressed in terms of percent, and is
stated as rate of the principal involved
per annum.
Principal
 is the base in which interest is computed.
If an amount is loaned or borrowed, this
amount is referred to as principal.
Term
 is the unit of time for which the
principal is loaned, or the length of
time the principal is borrowed.
Interest Rate
 is the multiplier expressed as
percent of the principal to be paid
each term.
Maturity Value
 is the sum of the principal and
the interest that accumulates
over the agreed term.
The agreed term is usually expressed in years or a
fraction of a year (quarterly, semiannually, or monthly)
. Conventionally, an agreed term in a business
transaction expressed in days, weeks, or months is
converted to the equivalent fraction of a year. If the
term is not stated in a given situation, it is
understood as percent per annum.
SIMPLE
INTEREST
SIMPLE INTEREST
Simple interest refers to the amount earned for one year
calculated by multiplying the principal by interest rate. Only
the principal, no more no less, is considered for the
computation of interest. This kind of interest is applied for
transactions that usually last only for less than a year.
SIMPLE INTEREST

SIMPLE INTEREST

SIMPLE INTEREST

EXAMPLE 1
Michelle invested an amount of Php
150 000 for 9 months at 4 %. Find
the interest and the maturity value
of her investment.
EXAMPLE 2
Yuan deposited Php 5 000 in a bank paying
9% simple interest for 3 years. How much
would he have in his account at the end of
three years, assuming that no withdrawal
was made?
EXAMPLE 3
Victor borrowed Php 15 000 from a bank
charging 7% simple interest with an agreement
that he would pay the principal and the interest
at the end of the term. If he paid Php 17 100 at
the end of the term, for how long did he use the
money?
EXAMPLE 4
Happylou invested Php 75 000 in the stock
market which guaranteed an interest of Php
11 250 after one and a half years. At what
rate would his investment earn?
EXAMPLE 5
Bong paid an interest of Php 5000 on a
three year loan at 8% simple interest.
a. What was the original loan?
b. How much did he pay at the end of
three years?
EXAMPLE 6
Cardo borrowed Php 35 000 from a
bank charging 12% simple interest, how
much would he pay at the end of 18
months?
EXAMPLE 7
An amount of Php 1 000 000 is invested in a
financial institution.
a. How long will it take for the amount to
reach Php 1 001 000 at 2% simple interest?
b. At what interest rate will it earn Php 1
000 in 10 months?
ACTIVITY 

TIME BETWEEN
TWO DATES
TERM: ACTUAL AND APPROXIMATE
Actual Time (Exact Time) is based on the exact number of inclusive
dates of transaction. It is obtained by counting each day of every
month of the term, excluding the origin date.
Approximate Time (Ordinary Time) is based on 30-day month
computation. It is obtained by assuming that every month has 30 days
and then counting again each day of every month, excluding the origin
date.
EXAMPLES
Find the actual time and approximate time between
the following dates.
1. June 10, 2018 to September 24, 2018
2. October 31, 2004 to March 25, 2005
3. February 14, 2012 to May 1, 2013
4. April 29, 2015 to December 28, 2017
ACTIVITY 

Compute for your exact


age as of this moment.
INTEREST: EXACT AND ORDINARY

INTEREST: EXACT AND ORDINARY
Ordinary interest at actual time is usually the called
the Banker’s Rule. The bank usually used this in
computing for the interest of invested money. If the
method to be used is not specified, the Banker’s
Rule applies.
EXAMPLE 1
On June 10, 2014, Charles applied for a Php 12 000 loan at 8%
simple interest. He promised to pay on September 24, 2014.
Compute for the interest on the loan using
a. Exact interest at actual time
b. Exact interest at approximate time
c. Ordinary interest at actual time
d. Ordinary interest at approximate time
EXAMPLE 2
Vince borrowed Php 25 000 from William at 15% simple
interest. He promised to pay the principal and the interest
on October 27, 2014. If the loan was made on February 12,
2014, how much is:
a. the interest on the loan?
b. the amount William would receive on maturity date?
EXAMPLE 3
Find the exact interest and ordinary
interest on Php 35 000 at 15.25%
simple interest rate for 190 days.
PROMISSORY
NOTES
Simple Interest Note and Bank Discount Note
PROMISSORY NOTE
A note (sometimes called promissory note) is a
written promise on the part of a person or business,
called the maker of the note, to pay another person
of business, called the payee, within a specified
period of time.
SIMPLE INTEREST NOTE
In a simple interest note, the value stated on the note
is called the face value and it corresponds to the
principal. The total amount to be repaid is called the
maturity value of the note and the date on which the
total amount is due is called the maturity date.
SIMPLE INTEREST NOTE
Face Value Origin Date

Term of the Note

Payee Interest Rate

Maker of the Note


EXAMPLE 1
A simple interest note for
Php 25 000 with interest at 16% per
annum was signed on January 12, 2012
and due on April 25, 2012. Find the
maturity value.
EXAMPLE 2
The maturity value of a five-month
simple interest note was Php 36 800. If
the interest rate was 10% per year,
what is the face value of the note?
EXAMPLE 3
What is the term of a simple interest
note with face value of Php 50 000, a
maturity value of Php 53 750 and an
interest rate of 15%?
COMPOUND
INTEREST
COMPOUND INTEREST
When earning is added to the principal at regular intervals and the sum becomes
a new principal, the interest is said to be compounded. The present value of the
money is the amount deposited in the current account in order to have a certain
amount in the future. The final amount is called the compound amount. The
difference between the compound amount and the original principal is called the
compound interest. The interest may be compounded annually, semi-annually,
quarterly, or monthly.
COMPOUND INTEREST

COMPOUND INTEREST

COMPOUND INTEREST
Frequency of Conversion Value of m
annually m=1
semi-annually m=2
quarterly m=4
monthly m = 12
COMPOUND INTEREST

EXAMPLE 1

EXAMPLE 2
Eca deposited Php 1 500 in a bank with
12% interest compounded quarterly.
How much will she have in her account
at the end of one year?
EXAMPLE 3
Ms. Gallano wants to have Php 40 000 in her
account by the end of 3 years. How much
should she invest today in the bank paying
8.5% interest compounded semi-annually?
EXAMPLE 4
John Peter makes an investment worth Php 15
000 in a savings bank paying 14% compounded
monthly. If she withdraws all his investments and
the interest which amount to Php 19 450, for
how long did he invest his money?
EXAMPLE 5
At what rate compounded
quarterly will Php 14 000 become
Php 16 500 for three years?

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