NAME: ____________________________________ YR & SEC: _____________________

Competency:
The learner should be able to:
● Illustrates simple and compound interests. (M11GM-lla-1)
● Distinguishes between simple and compound interests. (M11GM-lla-2)
● Computes interest, maturity value, future value, and present value in simple interest
and compound interest environment. (M11GM-lla-b-1)

To the Learners:
Before starting the module, I want you to set aside other tasks that will disturb you while
enjoying the lessons. Read the simple instructions below to successfully enjoy the objectives of this
kit. ​Have fun!
1. Follow carefully all the contents and instructions indicated in every page of this module.
2. Writing enhances learning. Keep this in mind and take note of the important concepts in
your notebook.
3. Perform all the provided activities in the module.
4. Let your facilitator/guardian assess your answers using the answer key card.
5. Analyze the post-test and apply what you have learned.
6. Enjoy studying!

Expectations
This module is designed to help you master the following skills:
● Describe situations where simple interest and compound interest is applied.
● Determine the difference between simple and compound interests.
● Solve the interest, maturity value, future value, and present value in simple interest and
compound interest environment.

Pre - Test

A. Match the terms in column A with the correct definitions in Column B. You may choose
more than one answer from Column B. Write the letter of the correct answer on a
separate sheet of paper.
 COLUMN A COLUMN B
1. Principal A. time money is borrowed
2. Term B. amount paid or earned for the use
3. Interest of money
4. Maturity value C. percentage of increase of investment
5. Interest rate D. amount of money borrowed or
invested
E. amount added by the lender, to be
received on repayment date
F. amount received on repayment date

B. Solve for what is asked in the following. Show your solutions to support your answers.
1. John Kenneth has invested 200 000 for 1 year. Find the future value based on
the following conditions:
a. simple interest at 7.5%
b. 7.5% interest compounded every 6 months.
c. find the difference between the two
2. Wilson deposited 20 000 at 4.75% for 4 years and 3 months. Determine the
future value of the deposit if the interest is compounded
a. monthly
b. quarterly
c. semi-annually
d. identify which of the three conditions accumulates the highest future value
3. A total of 60 000 is invested at a simple interest rate of 6% for 4 months. How
much interest is earned on this investment?
4. At Pola Rural Bank, Mira deposited 150 000. Her money earned a simple
interest of 2 134 for 2 years and 5 months. Find the interest rate the bank gave
her.
5. Rosalie earned 370 interest on a 5 890 deposit in an account paying 2.3% interest
rate. For how long in terms of days was the money deposited?

Looking
Back
In simplifying logarithmic expressions and equations, we follow analogous sets of
rules are as follows:
Common logarithm Natural logarithm
log 1 = 0 l​ n 1 = 0
log 10 = 1 ln ​e​ = 1
log 10x​ ​ = x l​ n ​e​x​ = x
10logx
​ ​=x ​e​lnx​ = x
l​ n xy​ ​ = ylnx
ln xy = ln x + ln y
ln xy = ln x – ln y

Introduction of the Topic

Interest​ is the amount paid by a borrower to a lender for a credit or the amount
gained on an investment. The value of the interest depends largely on the interest rate, the
borrowed or invested amount-referred to as the​ principal​, and the length of time the
principal is invested or borrowed.
Examples of interests include interest paid for bank loans, bond yields, and returns
on savings. Interest is generally computed as a percent of the principal. The percent of the
principal paid for the use of money on a certain length of time in an investment or loan is
called the ​interest rate​. The time is generally expressed in terms of years.
Simple Interest ​is an interest which is computed entirely at once from the moment the
money is borrowed or invested until it will be paid. It is computed by multiplying the
principal, the rate, and time in years. In symbols,
I = Prt
where ​I​ is the interest;
​P​ is the principal;
r​ is the interest rate; and
t​ is the length of time.
Algebraically, we can derive the formulas to find the principal, rate, and time. These
formulas are as follows:
P= I
rt r= I
Pt t= I
Pr

Example 1:​ A cooperative offers 0.30% annual simple interest for a particular deposit. How
much interest will be earned if 100 000 pesos is deposited in this savings account for 1 year?
Given: P = 100 000 r = 0.30% = 0.0030 t = 1 year
Find: I = ?
Solution: I = Prt
I = (100 000)(0.0030)(1)
I = 300
Answer: The interest earned is 300
Example 2:​ How much interest is charged when 90 000 is borrowed for 8 months at an
annual interest rate of 10% ?
Given: P = 90 000 r = 10% = 0.10 t= 8
12 year = 0.67
Find: I = ?
Solution: I = Prt
I = (90 000)(0.10)(0.67)
I = 6 030
Answer: The interest earned is 6 030
Note: When the term is expressed in months, it should be converted in years by M
12 .

Example 3:​ Hazel earned 5 000 for 3 years and 8 months at 5 41 % simple interest. How
much did he invest?
Given: I = 5 000 r = 5.25% = 5.25% = 0.0525 t= 8
3 12 years = 3.67
Find: P = ?
Solution: P = rtI
P = (0.0525)(3.67)
5 000

P = 25 974.03
Answer: Hazel invested 25 974.03
Example 4:​ In how many years will the amount 20 000 accumulate to 50 000 at
5.2% simple interest rate?
Given: P = 20 000 M = 50 000 r = 5.2% = 0.052
Find: t = ?
Solution: t = MP−Pr
t = (20
50 000−20 000
000)(0.052)
t = 28.84615385 or 28.85 years (28 years and 10.15 months)
Answer: 28.85 years
Maturity (Future) Value ​ is the amount to be received on the due date or on the
maturity of instrument/security that investor is holding over its period of time and it is
calculated by multiplying the principal amount to the compounding interest which is further
calculated by one plus rate of interest to the power which is time period.
F=P+I F = P(1 + rt)
where F = maturity (future) value where F = maturity (future) value
P = principal P = principal
I = simple interest r = interest rate
t = term/time in years
Example 5:​ How much is the maturity value if Honesto will borrow money worth 7 000
at 7 21 % simple interest for 3 years and 6 months?
Given: P = 7 000 r = 7.5% = 0.075 t= 3.5 years
Find: F = ?
Method 1: Method 2:
Solution 1: F = P(1 + rt) Solution: I = Prt
= (7 000) [1 + (0.075)(3.5)] I = (7 000)(0.075)(3.5)
= (7 000) [1 + 0.2625] I = 1 837.50
F = (7 000)(1.2625)
F= 8 837.50 F=P+I
Answer: The maturity (future) value is F = 7 000 + 1 837.50
8 837.50 F = 8 837.50
Answer: The maturity (future) value is
8 837.50

Compound interest​ is calculated on the principal amount and also on the accumulated
interest of previous periods, and can thus be regarded as ​"interest on interest."
There can be a big difference in the amount of interest payable on a loan if interest is
calculated on a compound rather than simple basis. On the positive side, the magic of
compounding can work to your advantage when it comes to your investments and can be a
potent factor in wealth creation.
The formula for compound interest, including principal sum is:
​F = P (1 + ​i​)n​

​where F = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)
i = the interest rate per conversion, also referred as periodic interest rate
n = the number of conversion period or the total number of payments
To get the value of ​i​ in the formula, use ​i​ = fj , where ​j​ is the nominal rate or the
quoted interest rate and​ f​ is the frequency of conversion.
The nominal rate ​j​ is the annual rate, unless otherwise stated. The frequency of
conversion ​f​ tells the number of times the interest is added to the principal in one year. That
is,
f if
1 annually
2 semi-annually
4 quarterly
6 every 2 months
12 monthly
360 daily
It's worth noting that this formula gives you the future value of an investment or loan,
which is compound interest ​plus​ the principal. Should you wish to calculate the compound
interest only, you need to deduct the principal from the result. So, your formula looks like
this:
Compounded interest only (without principal): ​F = P (1 + ​i​)n​ ​- P
Example 6:​ If 25 000 is invested at 8.2% compounded monthly, how much is the
future value and the compound interest after 2 years?
Given: P = 25 000 r = 8.2% = 0.082 n = 12 t = 2 years
Find: F and I
Solution: F = 25 000 (1 + 0.082 12 ) (12)(2)
​
F = 25 000 (1 + 0.006833)24​
​ ​F = 25 000 (1.006833)24​
​F = 29 438.69
I=F–P
I = 29 438.69 – 25 000
​I = 4 438.69
Example 7:​ If 7 000 has accumulated to 20 000 for 20 months, how much is the
nominal rate compounded every three months?
Given: P = 7 000 F = 20 000 t = 1220 = 35 f = 4 n = ft = 4( 35 ) = 20
3
Find:​ j =​ ? nominal rate
Solution: ​j​ = ​f​ [ ( FP ) – 1]
1
n

​j​ = ​4​ [ ( 20 – 1]
1
000
20
7 000 )
3

​j​ = ​4​ [ (2.86) – 1]

3
20

​j​ = 4[(2.86)0.15 – 1]
​j​ = 4[ 1.1707 – 1]
​j​ = 4[ 0.1707 ]
​j​ = 0.6828 or 68.28%
Maturity (Future) Value and Compound Interest
​​F = P(1 + r)t​
where ​ ​P = principal or present value
F = maturity (future) value at the end of the term
r = interest rate
t = term/time in years
The compound interest I​c is
​ given by I​ ​c​ = F - P

Example 8:​ Find the maturity value and the compound interest if 18 000 is
compounded annually at an interest rate of 5% in 6 years.
Given: P = 18 000 r = 5% = 0.05 t = 6 years
Find: (a) maturity Value F
(b) compound interest I​c
Solution: (a) ​F = P(1 + r)t​
F = 18 000 (1 + 0.05)6​
​ ​F = 18 000 (1.05)6​
F = 18 000 (1.340095641)
​F = 24 121.72
 (b) I = F – P
I = 24 121.72 – 18 000
​I = 6 121.72
Present Value P at Compound Interest
P = F
= F (1 + r)−t
(1+r)t

where P = principal or present value

F = maturity (future) value at the end of the term
r = interest rate
t = term/time in years

Example 9:​ What is the present value of 70 000 due in 5 years if the money is worth
12% compounded annually?
Given: F = 70 000 r = 12% = 0.12 t = 5 years
Find: P
Solution: P = (1+r)
F
t

70 000
P = (1+0.12)5

70 000
P = 1.762341683
P = 39 719.88
​Answer:​ ​The present value is​ 39 719.88
​Example 10:​ Argenia wanted to have 400 000 in 6 years time. How much money should
Argenia place in a bank that pays 1.5% compounded annually?
Given: F = 400 000 r = 1.5% = 0.015 t = 6 years
Find: P
Solution: P = (1+r)
F
t

400 000
P = (1+0.015)6

400 000
P = 1.093443264
P = 365 816.88
​Answer:​ ​The present value is​ 365 816.88

Activities

​Activity
1:
Complete the table below on simple interest. Show your solution on a separate sheet.

Principal ( ) Rate Time Interest Maturity Value

1 0.85% 2.25 years 1 250
2 50 000 0.005% 2 750
3 25 000 4 years and 5 months 19 000
4 1 500 2.50% 1 yr and 3 months
5 10.20% 25 000 950 000
​Activity 2: Solving word problems involving simple interest.
Answer the following questions. Show your solution to support your answer.
1. How much is the principal to earn 2, 310 for 4 years at 2.5% simple interest?
 2. Find the simple interest on 6 900 at 16 32 % per year for two years.
3. If a sum of money produces 3 900 as interest in 3 years and 3 months at 16% per
year simple interest, find the principal.
4. If you put money into a savings account that earns 4 200 over seven years at a rate of
3%, how much money did you put into the account?
5. If an investment over eight years at a rate of 8 000 results in a final balance of
33 000, what was the original investment?
​Activity 3: Solving word problems involving compound interest
​Answer the following questions. Show your solution to support your answer.
1. An 8.5% account earns continuous interest. If 125 000 is deposited for 5 years, what
is the total accumulated?
2. What principal will amount to 100 000 if invested at 4% interest compounded
semiannually for 5 years?
3. Fifty thousand pesos is left in a bank savings account drawing 7% interest, compounded
quarterly for 10 years. What is the balance at the end of that time?
4. You lend out 10 000 at 10% compounded monthly. If the debt is repaid in 18 months,
what is the total owed at the time of repayment?
5. ​If you deposit 4 000 into an account paying 6% annual interest
compounded quarterly, how much money will be in the account after 5 years?

Remembe
r
● Interest is the cost of borrowing money, where the borrower pays a fee to the lender for the
loan.
● Generally, simple interest paid or received over a certain period is a fixed percentage of the
principal amount that was borrowed or lent.
● Compound interest accrues and is added to the accumulated interest of previous periods, so
borrowers must pay interest on interest as well as principal.
● Compound interest is calculated by multiplying the initial principal amount by one plus the
annual interest rate raised to the number of compound periods minus one.
● Interest can be compounded on any given frequency schedule, from continuous to ​daily​ to
annually.
● When calculating compound interest, the number of compounding periods makes a
significant difference

Check your Understanding

​Activity 4: Solving word problems involving simple interest.
Answer the following questions. Show your solution to support your answer.
1. If you invest 10 000 at an interest rate of 10%, how much money will you have after
three years?
2. If you received 11 200 on 25 000 invested at a rate of 9%, for how long did you
invest the principal?
3. If you borrow 45 000 for four years at an interest rate of 6%, how much interest will
you pay?
4. What will the final balance be for 5 000 invested at 4% for six years?
5. How much principal must be invested to earn 25 200 in eight years at an interest rate
of 7%?
Activity 5: Solving word problems involving compound interest
Answer the following questions. Show your solution to support your answer.
1. If you deposit 6 500 into an account paying 8% annual interest
compounded monthly, how much money will be in the account after 7 years?
2. How much money would you need to deposit today at 9% annual interest
compounded monthly to have 12 000 in the account after 6 years?
3. If you deposit 5 000 into an account paying 6% annual interest
compounded monthly, how long until there is 8 000 in the account?
4. If you deposit 8 000 into an account paying 7% annual interest
compounded quarterly, how long until there is 12 400 in the account?
5. Mr. George invests $800 in an account which pays 20% compound interest per year. If
interest is compounded half yearly, find the accumulated value and compound interest
after 2 years.
Activity 6:
Answer the following questions. Show your solution to support your answer.
1. How much should you deposit initially in an account paying 10% compounded
semiannually in order to have 1,000,000 in 30 years? b) compounded monthly? c)
compounded daily? d) continuous compounding?
2. Mrs. Estayan wants to compare simple and compound interests on a 350 000
Investment for 3 years and 3 months.
(a) Find the interest if funds earn 6.5% simple interest for 1 year.
(b) Find the interest if funds earn 6.5% interest compounded annually.
(c) Find the difference between the two interests.

Post – Test
A. Match the terms in column A with the correct definitions in Column B. You may
choose more than one answer from Column B. Write the letter of the correct answer on
a separate sheet of paper.
COLUMN A COLUMN B
6. Principal G. time money is borrowed
7. Term H. amount paid or earned for the use
8. Interest of money
9. Maturity value I. percentage of increase of investment
10.Interest rate J. amount of money borrowed or
invested
K. amount added by the lender, to be
received on repayment date
L. amount received on repayment date

B. Solve for what is asked in the following. Show your solutions to support your answers.
1. John Kenneth has invested 200 000 for 1 year. Find the future value based on
the following conditions:
d. simple interest at 7.5%
e. 7.5% interest compounded every 6 months.
f. find the difference between the two
2. Wilson deposited 20 000 at 4.75% for 4 years and 3 months. Determine the
future value of the deposit if the interest is compounded
e. monthly
f. quarterly
g. semi-annually
h. identify which of the three conditions accumulates the highest future value
3. A total of 60 000 is invested at a simple interest rate of 6% for 4 months. How
much interest is earned on this investment?
4. At Pola Rural Bank, Mira deposited 150 000. Her money earned a simple
interest of 2 134 for 2 years and 5 months. Find the interest rate the bank gave
her.
5. Rosalie earned 370 interest on a 5 890 deposit in an account paying 2.3% interest
rate. For how long in terms of days was the money deposited?

Reflection
​
Direction: After the discussion ,lessons ,and studies the learner should
answer the following question to be able to know whether the learner attain
some level of knowledge learned in this session.
1. I’ve learned in this lessons were________________________________________________
____________________________________________________________________________
2. I can use what I have learned in real-life and everyday situations such as
______________________________________________________________________
____________________________________________________________________________

3. While answering the module, I have learned that

___________________________________
____________________________________________________________________________
4. Sharing with my friends and family the knowledge on
___________________________________________________________________________
___________________________________________________________________________

5. Well, the lesson is __________________________________________________________

____________________________________________________________________________

Additional Activities
​

​ Find the unknown principal P, rate r, time t, and, compound interest I​c ​, by
completing the table.
Principal (P) Rate ( r ) Time (t) Compound Maturity Value
Interest (I​c​) (F)
8 000 5% 8 months (1) (2)
22 000 7.5% 5 years and 4 (3) (4)
months
75 000 5.5% 10 months (5) (6)
(7) 1% 6 years (8) 25 000
(9) 7.5% 4 years and 6 (10) 400 000
months