BUSINESS

MATHEMATICS
 PRAYER
Our Heavenly Father,
We thank you for the hundredfold blessings. May we in return to you
your good works by multiplying it with love and respect, adding
more faith, subtracting the unworldly behavior and evil works and
dividing your given talents to others so we can sum it all and be
united as one in your family.
In Jesus Name AMEN
 NETIQUETTE
• Wear your maroon/white shirt as scheduled.
• Be on time.
• Stay focused on the class discussion.
• Be respectful at all times.
• Turn on your camera so that your teacher can see you.
• Mute your audio/microphone unless your name is called.
• When speaking, say your name first so everyone in the room knows who is talking.
• If you have questions, use the "raise your hand" button or type it on the chat box.
 INTERESTS
COMPOUND INTERESTS
LEARNING OBJECTIVES
At the end of the session, the students should be able to:
• illustrates simple and compound interests;
• distinguishes between simple and compound interests;
• computes interest, maturity value, future value, and present value in simple
interest and compound interest environment;
• solves problems involving simple and compound interests;
RECALL: SIMPLE INTEREST
• It refers to the amount earned for one year calculated by
multiplying the principal by the interest rate.
• This kind of interest is applied for transactions that usually last
only for less than a year.
• Formula:
𝑰 = 𝑷𝒓𝒕
I = interest
P = principal, or the amount invested or borrowed
r = interest rate
t = term or time in years
 SIMPLE INTEREST

•Example:
How much interest is charged when P50,000 is
borrowed for 9 months at an annual interest
rate of 10%?
 MATURITY VALUE
- is the sum of the principal and the interest that
accumulates over the agreed term.
𝑨=𝑷+𝑰
𝑨 = 𝑷 + 𝑷𝒓𝒕
𝑨 = 𝑷(𝟏 + 𝒓𝒕)
 SIMPLE INTEREST
•Example:
An amount of ₱ 150 000 is invested for 9 months at 4%.
Find the:
a. Interest
b. Maturity value
 SIMPLE INTEREST
Solution:
TERM: ORDINARY AND EXACT TIME

• Ordinary time is based on 30 – day month computation.

This means that a 6 – month transaction covers (6)(30days)
= 180 days.
• Exact time is based on the exact number of inclusive dates
of transaction. For instance, a loan entered on December
24, 2014 and matured on April 11, 2015 has 108 days.
 INTEREST: ORDINARY AND
EXACT INTERESTS
Exact Time Ordinary
Time
360 days
Ordinary Interest with exact time Ordinary interest with
(Banker’s Rule) ordinary time

365 days
Exact interest with
Exact interest with exact time
ordinary time
PRESENT VALUE
The present value P at a simple interest rate r
of a given amount A for a given term t can be
determined by the formula:
𝑨
𝑷=
𝟏 + 𝒓𝒕
EXAMPLE

•Find the present value of ₱86,000 at

8% simple interest for 3 years.
EXAMPLE

Solution:
COMPOUND INTEREST
COMPOUND INTERESTS
• An amount earned for one year calculated by multiplying the principal
by the interest rate.
• Borrowing, bonding, and saving in financial institutions apply compound
interest.
• Usually used for long – term transactions.
EXAMPLE

•If a ₱100,000 principal is subjected

to 6% simple interest for 60 days, it
will accumulate an interest of:
EXAMPLE 1
Solution:
CONVERSION PERIOD

- The periods of time when the addition of interest and the

principal occur.
- When applied, may have the interest compounded annually
(once a year), semi-annually (twice a year), quarterly (four
times a year), or monthly (twelve times a year).
DEFINITION OF TERMS

Compound amount – the accumulated amount of given principal at the given

time interval
Compound interest – the original principal minus the compound amount
Term – the length of time for which the compound interest is to calculated
Nominal rate - the quoted rate which is the basis for converting the interest
rate per conversion period.
 Term

Time Interval

Annually Semi-Annually Quarterly Monthly

1 year 1 period 2 periods 4 periods 12 periods

2 years 2 periods 4 periods 8 periods 24 periods

3 years 3 periods 6 periods 12 periods 36 periods

 Interest per Conversion Period

Nominal Rate

Annually Semi-Annually Quarterly Monthly

1 1 1
1 year 1% % % %
2 4 12

1 1
2 years 2% 1% % %
2 6

1 3 1
3 years 3% 1 % % %
2 4 4
FORMULA

Let P be the original principal, I the interest rate per period, and n the
number of conversion periods. The compound amount 𝐴𝑛 at the end of the
𝑛𝑡ℎ period is:
𝐴𝑛 = 𝑃(1 + 𝑖)𝑛
And the compound interest 𝐼𝑛 for the n conversion periods is
𝐼𝑛 = 𝐴𝑛 − P
EXAMPLE
EXAMPLE 1

• Compute for the compounded amount and interest on ₱1, 250,000 principal for 3 years
at 3.3% compounded quarterly.
References
• Lim, Yvette F., et. Al. (2016) Math for Engaged Learning, General
Mathematics. Quezon City: Sibs Publishing House, Inc.
• Orines, Fernando B. (2016) Next Century Mathematics 11 General
Mathematics. Quezon City: Phoenix Publishing House, Inc.
• Oronce, Orlando A. (2019) General Mathematics. Quezon City:
Rex Book Store, Inc.
• Oronce, Orlando A. (2019) My Skill Builder General Mathematics.
Quezon City: Rex Book Store, Inc.
• General Mathematics Learner’s Material (DepEd)
Thank You!