Republic of the Philippines

DEPARTMENT OF EDUCATION
Region I
Schools Division Office I Pangasinan
Pangasinan National High School
Lingayen, Pangasinan

General Mathematics
Simple and Compound Interest
Quarter 2 - Week 1-2 – Module 1

Most Essential Learning Competency:

1. illustrate simple and compound interest;

2. compute interest, maturity value, and
present value in simple interest
environment, and solve problems
involving simple interest;
3. compute interest, maturity value, and
present value in compound interest
environment, and solve problem involving
compound interest;
4. compute maturity value, interest, and present
value, and solve problems involving
compound interest when compound interest
is computed more than once a year.
 This module is about simple and compound interest. It discusses how simple and
compound interest are illustrated and distinguished. You will also learn how to compute
interest, maturity value, future value and present value in simple and compound interest
environment. Such concepts and skills are used to model and solve real-life problems. You will
learn more about these concepts as you study all the lessons in this module.
This module contains the following :
Lesson 1 Illustrating Simple and Compound Interest
Lesson 2 Simple Interest
Lesson 3 Compound Interest
Lesson 4 Compounding more than once a year
Borrower or Debtor – person or an institution that owes the money or avails of the funds from the
lender
Compound Interest – interest calculated on the sum of an original principal plus accrued
interest
Conversion or Interest Period – successive conversions of interest between time Frequency of
Conversion – refers to the number of conversion periods in a year Interest – a paid premium for
the use of capital

Lender or Creditor – person (or institution) who invests the money or makes funds available

Loan date – the date on which money is received by the borrower during loan
Maturity date – a date on which the money borrowed or loan is to be completely repaid
Maturity Value or Future Value – amount after a number of years that the lender receive from
the borrower on the maturity date

Nominal rate – interest rate annually

Principal – amount of money borrowed or invested on the origin date
Rate – annual rate usually in percent, a premium charged by the lender, or rate of increase of the
investment on loan
Simple Interest – interest calculated on principal
Term or Time – amount of time in years the money is borrowed or invested length of time between
the origin and maturity dates.

What I Know
Directions: Choose the best answer from the four options given. Write the letter of the
best answer on your paper.
1. An amount of money borrowed or invested on the origin dat
A. rate B. interest C. principal D. term
2. What do you call a date on which the money borrowed or loan is to be completely
repaid?
A. loan date B. maturity date C. future date D. none of the above
3. A premium paid for the use of capital.
A. interest B. time C. principal D. rate
4. Mr. Cruz invested a certain amount in a bank at 6% simple interest per year. The interest he
received amounted to Php 105,000 for 7 years. How much did Mr. Cruz invest?
A. Php 250,000 B. Php 44,100 C. Php 25,000 D. Php 4,100
5. How much should Mrs. Reyes pay of a borrowed amount of Php 12,000 at 4% annual
simple interest rate payable for 3 years?
A. Php 1,440 B. Php 13440 C. Php 26,400 D. Php 87,360
6. How long will a principal of Php 30,000 that earn an interest of Php 4,500 at 3% simple
interest?
A. ½ yr. B. 5 yrs. C. 22.22 yrs. D. None of the above
7. Find the maturity value of Php 40,000 compounded annually at an interest rate of 2.5%
in 4 years.
A. Php 6,002,500 C. Php 44,152.52
B. Php 36,238.03 D. Php 97,656.25
8. How much is the interest of Php 60,000 investment at 1.2% compounded annually for
10 years?
A. Php 7,601.51 C. Php 126,350.89
B. Php 6,746.75 D. Php 299,536.75
9. Suppose Php 55,000 will due in 9 years at 7% compounded annually. How much is the capital
A. Php 463.79 C. PHP 29,916,36
B. Php 4,637.9 D. Php 58,563.62
10. What is the frequency of conversion when money compounded monthly? A. 2 B.
4 C. 12 D. 365
11. Find the interest rate in a conversion period when the annual interest rate is 7.5%
compounded quarterly.
A. 0.1875% B. 1.875% C. 18.75% D. 4.25%
12. Find the total number of conversion periods when money is compounded monthly with
1 year and 6 months term.
A. 3 B. 6 C. 18 D. 19.2
13. Find the maturity value if John deposited Php 35,000 in a bank at 3% compounded
semi-annually for 12 years.
A. Php 41,846.64 B. Php 37,608.88 C. Php 50,033 D. Php 71,147.79
14. If Mr. Santos deposited Php 25,000 in a bank at 4% compounded quarterly. for 14 years.
Compute the interest.
A. Php 1,439.20 C. Php 18,645.25
B. Php 8,032.27 D. Php 105,865.33
15. What is the present value of Php 55,000 that will due in 3 years at 1% compounded
monthly?
A. Php 1,779.21 C. Php 40,844.26
B. Php 38,440.87 D. Php 53,381.57
What’s New
Lesson 1: ILLUSTRATING AND DISTINGUISHING BETWEEN
SIMPLE AND COMPOUND INTEREST
These knowledge on simple and compound interest will enable you to compare the interest
gained through the process of illustrating between simple and compound interest. Thus, this lesson will
enable you to distinguish and understand the aforementioned concepts.

Illustration of simple and compound interest:

Problem: Mr. Cruz plan to invest Php 50,000 to the Bank for 5 years. If Bank A will offers 3%
simple interest rate per year while Bank B also offers the same rate but compounded annually. Which
bank do you think will Mr. Cruz invest and why?

Study the illustration given

Solution: Simple interest versus Compound interest, with annual rate

Simple Interest

Amount after t years

Time (t) Principal (P) Bank A (Is)
(Maturity Value)
Solution Answer

1 (50,000)(0.03)(1) 1,500 50,000 + 1,500 = 51,500

2 (50,000)(0.03)(2) 3,000 50,000 + 3,000 = 53,000
3 Php 50,000 (50,000)(0.03)(3) 4,500 50,000 + 4,500 = 54,500

4 (50,000)(0.03)(4) 6,000 50,000 + 6,000 = 56,000

5 (50,000)(0.03)(5) 7,500 50,000 + 7,500 = 57,500
 Compound Interest

Amount after t years

Time Principal (P) Bank A (Is)
(Maturity Value)
(t) Solution Answer
1 (50,000)(0.03)(1) 1,500 50,000 + 1,500 = 51,500
2 (51,500)(0.03)(1) 1,545 51,500 + 1,545 = 53,045
53,045 + 1,591.35
3 (53,045)(0.03)(1) 1,591.35
Php 50,000 = 54,636.35
54,636.35 + 1,639.091
4 (54,636.35)(0.03)(1) 1,639.091
= 56,275.441
56,275.441 + 1,688,263
5 (56,275.441)(0.03)(1) 1,688,263
= 57,963.704

Interest gained:

Simple Interest : Php 57,500 - Php 50,000 = Php 7,500

Compound interest : Php 57,963.704 – Php 50,000 = Php 7,963.704

What’s More

Enrichment Activity 1

Suppose you invested Php 20,000 in a Bank for 3 years with 2% interest. Illustrate it in a
simple interest versus compound interest and compare the interest gained.

What’s New
Lesson 2: SIMPLE INTEREST

In lesson 1 you learned how to illustrate and distinguished simple and compound interest. In
lesson 2, you will get to know three important factors in looking for annual simple interest namely
principal amount, invested or borrowed, time or term of loan in years, and simple interest rate usually
expressed in percent.
Suppose, you deposit money in a bank account or borrow an amount from a lending institution,
in this scenario the amount involved is referred as the principal amount. Thus, it will also involve interest
rate when you borrow or deposit money in a bank for a saving account or if we borrow money from a
lender, then this money is referred to as the principal. The amount of money that must be paid is
computed as a percentage called interest rate which serves as some sort of money paid or collected as
rent as payment for the lender considering a particular period of time or term in years.
 Annual Simple Interest formula:

Is = P r t
Where
Is – simple interest P – principal

r – rate

t – term or time, in years

1. A cooperative Bank offers 0.50% of annual simple interest rate for a savings account. How
much interest will be earned if Php 500,000 pesos is deposited for 2 years ?
Solution:
Given: P = 500,000
r = 0.50% = 0.005
t = 2 years
Find: Is
Is = P r t
= (500,000) (0.005) (2)
= 5,000
Answer: Php 5,000 is the interest earned
2. If Mr. Santos borrowed Php 100,000 for 8 months at an annual simple interest rate of 3%.
How much interest is charged?
Solution:
Given: P = 100,000
r = 3% = 0.03
t = 8/12 year
Find: Is

Note: Convert first the months to year using this formula t = M/12
t = M / 12
= 8 / 12
= 0.67 year

Is = P r t
= (100,000) (0.03) (0.67)
= 2,010
Answer: Php 2,010 is the simple interest charge

3. How much money will be invested by Mrs. King if she earned an amount of Php 15,500 at
an annual simple interest of 5% in two years?
 Solution:
Given: r = 5% = 0.05 t =
2 years
Is = 15,500
Find: P

(from the simple interest Is formula we will derive the formula for principal P

𝐼𝑠 𝑃𝑟𝑡
Is = P r t = by using the division property of equality divide
𝑟𝑡 𝑟𝑡

both sides of the equation by r and t )

𝐼𝑠 𝐼𝑠
= 𝑃 or P =
𝑟𝑡 𝑟𝑡

15,500
P = (0.05)(2)

15,500
=
0.1

= 155,000
Answer: The amount invested is Php 155,000

4. What interest rate is being charged to a businessman that applies for a loan with an amount of
Php 250,000 in a bank with a simple interest of Php 75,000 for 3 years?
Solution:
Given: P = 250,000
Is = 75,000
t = 3 years
Find: r
(from the simple interest Is formula we will derive the formula for rate r)

𝐼𝑠 𝑃𝑟𝑡
Is = P r t = by using the division property of equality,
𝑟𝑡 𝑟𝑡

divide both sides of the equation by p and t )

𝐼𝑠 𝐼𝑠
= r or r = 𝑥100
𝑝𝑡 𝑝𝑡

75,000
= (250,000)(3) 𝑥 100

75,000
= 𝑥 100
750,000

= 0.1 x 100

= 10%

Answer: An annual simple interest rate of 10% bank charge

5. If Mr. Miguel is planning to lend money from a lending institution with an amount of Php 500,00 at a simple
interest of 5% that charges 125,000. How long will Mr. Miguel pay the said loan in years?

Note: To convert units of time from days or months to years, use these formulas:
𝑛𝑜.𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠
Time in months t=
12
𝑛𝑜.𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠
Time in days (for exact method) t=
365
𝑛𝑜.𝑜𝑓 𝑚𝑜𝑛𝑡ℎ𝑠
Time in days (for ordinary method) t=
360
Solution:
Given: P = 500,000
Is = 125,000
r = 5% = 0.05
Find: t

(from the simple interest Is formula we will derive the formula for time or term t

𝐼𝑠 𝑃𝑟𝑡
Is = P r t =
𝑝 𝑟 𝑝 𝑟

by using the division property of equality divide both sides of the equation by p and r )
𝐼𝑠 𝐼𝑠
= 𝑡 or t =
𝑝 𝑟 𝑝 𝑟

125,000
= (500,00)(0.5)

125,000
=
25,000

= 5 years
Answer: It will take 5 years

6. Find the unknown by completing the table below

Principal (P) Rate (r) Time (t) Interest (I)
250,000 2% 3 (a)
640,000 0.2% (b) 6,400
300,000 (c) 60 months 7,500
(d) 1.5% 5 4,500

𝐼𝑠
a. Is = P r t c. t =
𝑃 𝑡
7,500
=
= (250,000)(0.02)(3) (300,000)(5)

= 15, 000 = 0.005x 100

𝐼𝑠 = 0.5%
b. t =
𝑝 𝑟
6,400
= (640,000)(0.002)
𝐼𝑠
6,400 d. P =
= 𝑟 𝑡
1,280
4,500
=
= 5 years (0.015)(5)
4,500
=
0.075

= 60,000
 Maturity value or future value F is the total amount of money in a savings account after number of
years t at an interest rate r , in which many lending institutions are willing to know that a lender or
creditor will give to the borrower or debtor on the maturity date/future value.

Similarly, the original amount of money invested plus the total earned interest on that investment
called accumulated value or accumulated amount.

Maturity value (Future value) formula:

F = P + Is
Where:
F = Maturity value
P = Principal
Is = Simple interest
or substituting simple interest IS by Pr t results

F=P+Prt or
F = P (1 + r t)
Where :
F = Maturity (future) value
P = Principal
r = Annual simple interest rate
t = Term / Time in years

1. If Php 1.5 M is deposited by Mr. Dela Cruz in a bank. Find the maturity value with an annual simple
interest rate of 0.20% after 4 years?
Solution:
Given:
P = 1.5 M
r = 0.20% = 0.002
t = 4 years
Find: F

Note: There are two methods to solve the problem.

a.) Solve first the simple interest IS and then add it to the principal P, thus, F = P + Is.
b.) Solve using the derived formula F = P (1 + r t)
Method 1:
Is = P r t F = P + Is
= (1,500,000) (0.002) (4) = (1,500,000) (12,000)
= 12,000 = 1,512,000

or F = P + P r t
= (1,500,000) + (1,500,000)(0.002) (4)
= (1,500,000) + 12,000
= 1,512,000
Method 2:

F = P (1+ r t)

=(1,500,000) {1 +(0.002)(4)}

= (1,500,000)(1.008)

= 1,512,000

Answer: Php 1,512,000 is the Maturity value

What’s More
Enrichment Activity 2

Solve the following problems.

a.) Find the interest and maturity value of a loan for Php 120,00 at 4.5% simple interest for 2 years.

b.) How much will be the money of Mr. Kho if he will deposit Php 600,000 in the Bank for 8 years
that pays 0.3% simple interest.

c.) What is the interest rate per annum of a Php 30,000 for 3 years that accumulate to Php 48,000?

d.) If Mrs. Ong wants to have Php 500,000 in 5 years with simple interest of 3.5%. How much should
Mrs. Ong invest?

What’s New
Lesson 3: COMPOUND INTEREST

In investments such as saving accounts and bonds usually this method is used. In this case, the
interest is added to the account at regular intervals, and the sum becomes the new basis for
calculating interest. The interest gained at a certain term interval is automatically reinvested to return
more interest.

Study the table below that shows the principal P(Php 200,000) is invested at an annual interest rate

r (3%)compounded annually for 4 years t.

Year (t) Formula Computation

Amount at the end of the year Amount at the end of the year
1 P(1 + r) = P(1 + r) (200,000)(1.03) = 206,000
2 P(1 + r) = P(1 + r)2 (206,000)(1.03) = 212,180
3 P(1 + r) = P(1 + r)3 (212,180)(1.03) = 218,545.4
4 P(1 + r) = P(1 + r)4 (218,545.4)(1.03) = 225,101.762
 Maturity (Future) value & Compound Interest formula:

F = P(1 + r)t and Ic = F - P

Where

F = Maturity(future)value at the end of the

term

P = Principal or present value

r = Interest rate

t = Term / time in years

Ic = Compound interest

1. Suppose Php 25,000 is compounded annually at an interest rate of 4% in 4 years. Find the
maturity value and the compound interest.
Given :
P = 25,000
r = 4% = 0.04
t = 4 years

Find :
a.) Maturity value F
b.) Compound Interest Ic
Solution :
a.) F = P( 1 + r )t
= (25,000) (1 + 0.04)4
= (25,000) (1.04)4
= (25,000) (1.17)
= 29,246.46

b.) Ic= F – P
= 29,246.46 – 25,000
= 4,246.46

2. If Mr. Perez deposited in his bank account an amount of Php 50,000 at an annual interest
rate of 0.4% compounded yearly. How much amount of money will Mr.Perez have in his
bank account after 15 years?
Given :
P = 50,000
r = 0.4% = 0.004
t = 15 years
Find : F
Solution:
F = P( 1 + r )t Note: To simply (1.004)15 by
= (50,000) (1 + 0.004)15 using a scientific calculator just
= (50,000) (1.004)15
type 1.004, then press Xy and
= (50,000) (1.061709…)
press equal sign.
= 53,085.45
3. Find the present value of Php 70,000 at 6% compounded annually that will due for 10
years?
Given :
P = 70,000
r = 6% = 0.06
t = 10 years
Find : P

From the maturity value formula we will derive the formula for present value or
principal, thus:

𝐹 𝑃(1+𝑟)𝑡
= using the division property of equality divide both sides of the
(1+𝑟)𝑡 (1+𝑟)𝑡
equation by (1 + r )t. We will arrive with the formula of Present value which is
𝐹
P= .
(1+𝑟)𝑡

Solution:
𝐹
P=
(1+𝑟)𝑡

70,000
=
(1+0.06)10

70,000
=
(1.06)10

= 39,087.63

4. Suppose a businessman place his money in a time deposit in a bank compounded

annually that pays 0.8%. How much money should the businessman deposit so that he
will have Php 250,000 after 5 years?
Given:
F = 250,000
r = 0.8% = 0.008
t = 5 years
Find : P
Solution:
𝐹
P=
(1+𝑟)𝑡

250,000
=
(1+0.008)5

250,000
=
(1.008)5

P = 240,235.59
Answer : Php 240,235.59 the amount of money should the businessman will deposit
What’s More
Enrichment Activity 3
Complete the table below by finding the unknown Principal P, Rate r, Time t and compound
interest Ic.

Principal (P) Rate (r) Time (t) Compound Maturity Value

Interest (Ic) (F)
15,000 7% 12 (b) (a)

(c) 3% 8 (d) 60,000

What’s New

Lesson 4: COMPOUNDING MORE THAN ONCE A YEAR

F = P( 1 + i(m)/m )mt the same as F = P( 1 + j )t

Where
F = Maturity(future)value
P = Principal or present value
J(m)= Nominal rate of interest (annual rate)
m = frequency of conversion
t = Term / time in years j = Interest rate per conversion period
n or t & mt = Refer to the number of times that interest is compounded

1. Php 20,000 is deposited in a bank at 1.5% compounded semi-annually for 6 yrs. Compute for
the maturity value and interest.
Given:
P = 20,000
J(2)= 0.015
t = 6 years
m=2
Find : F and P

Solution:
Step 1 - Compute for the interest rate in a conversion period:
𝐽 = 𝑖 2 /𝑚
0.15
=
2

= 0.0075
 Step 2 - Compute for the total number of conversion periods:
mt = (2)(6)
= 12
Step 3 - Compute for the maturity value:
F = P(1 + j)n Note: To simply (1.0075)12 by
= (20,000)(1 + 0.0075)12 using a scientific calculator
just type 1.0075, then press Xy
= (20,000)(1.094) and type 12, then press equal
sign.
= Php 21, 880
Step 4 – Compute for compound interest
Ic = F – P
= 21,880 – 20,000
= 1,880
Answer: Php 21,880 is the maturity value and Php 1,880 is the interest
2. How much will Mr. Delos Reyes repay his loan, both the principal and interest at 15% after 3
years compounded quarterly?
Given:
P = 100,000
J(3) = 0.15
t = 3 years
m= 3
Find : F

Solution:
Step 1 - Compute for the interest rate in a conversion period:
𝐽 = 𝑖 3 /𝑚
0.15
=
4

= 0.0375
Step 2 - Compute for the total number of conversion periods:
mt = (4)(3)
= 12
Step 3 - Compute for the maturity value:
F = P(1 + j)n Note: To simply (1.0375)12 by
= (100,000)(1 + 0.0375)12 using a scientific calculator
just type 1.0375, then press XY
= (100,000)(1.56) and type 12, then press equal
sign.
= Php 156, 000
Step 4 – Compute for compound interest
Ic = F – P
= 156,000 – 100,000
= Php 56,000
Answer: Php 212,000 both the maturity value and interest
We may also compute for present value when interest is compounded more than once a year by using
this formula:
F = P( 1 + i(m)/m )mt
we can derive this formula by dividing both sides of the equation by ( 1 + 𝑗m/m)mt
𝐹 𝑃( 1 + 𝑗 𝑚/m)𝑚𝑡
=
( 1 + 𝑗 𝑚/m)𝑚𝑡 ( 1 + 𝑗 𝑚 /m)𝑚𝑡

𝑭 𝑭 𝑭
=𝑷 or 𝑷 = ( 𝟏 + 𝒋𝒎/𝐦)𝒎𝒕 or 𝑷 = (𝟏+𝒋)𝒏
( 𝟏 + 𝒋𝒎/𝐦)𝒎𝒕

1. Suppose Mrs. Reyes invested money at 2% compounded monthly. Find the

present value of Php 25,000 that will due for 2.5 years.
Given:
F = 25,000
t = 2.5
j(12) = 0.02
Find : P
Solution:
Step 1 - Compute for the interest rate in a conversion period:
𝐽 = 𝑖12 /𝑚
0.02
=
12

= 0.0017
Step 2 - Compute for the total number of conversion periods:
mt = (2.5)(12)
= 20
Step 3 - Compute for the maturity value:
Note: To simply (1.0017)30 by
𝑭
𝐏= using a scientific calculator just
(𝟏+𝐣)𝐧
𝟐𝟓,𝟎𝟎𝟎 type 1.0017, then press XY and
= (𝟏+𝟎.𝟎𝟎𝟏𝟕)𝟑𝟎 type 30, then press equal sign.
= Php 23,809.52

Answer: Php 23,809.52 is the present value

What’s More
Enrichment Activity 4

Interest Princip Nomin Frequenc Intere Tim Total No. Compoun Compoun
compounde al al rate y of st rate e in of d interest d amount
d conversio per year conversio
n period n
Monthly 15,000 6% 12 (a) 8 (b) (c) (d)
Quarterly 5,000 4% 4 (e) 10 (f) (g) (h)
Semiannual (i) 2% 2 (j) 12 (k) (l) 10,000
ly
ASSESSTMENT
Directions: Choose the best answer from the four options given. Write the letter of the best
answer on your paper.
1. An amount paid or earned for the use of money.
A. interest B. lender C. principal D. term
2. An interest calculated on principal
A. simple interest C. future interest
B. compound interest D. none of the above
3. An interest calculated on the sum of principal plus accrued interest
A. simple interest C. principal
B. compound interest D. rate

4. What is the formula in computing the simple interest on a given financial transaction?
𝑃
A. Is = C. Is = P(1+t)
𝑟𝑡

B. Is =𝑃𝑟𝑡 D. Is = Prt2
5. If the interest rate per conversion is 1% and money is compounded monthly, the nominal
rate is ____________.
A. 12% B. 14% C. 16% D. 18%
6. When the term is 3 years and 6 months and money is compounded semi-annually, the total
number of conversion period is _____________.
A. 6 B. 7 C. 8 D. 9
7. John deposited Php 40,000 in a bank with 0.4% simple interest. How much
will be the money of John after years?
A. Php 1,280 C. Php 56,000
B. P Php 41,280 D. Php 160,000
8. How long will Php 70,000 amount to Php 84,000 with simple interest rate of
4% per annum?
A. 0.5 yrs. B. 5 yrs. C. 5.5 yrs. D. 50 yrs.
9. If Mr. Castro borrowed Php 230,000 at an annual simple interest rate of 3.5%
for 6 years. How much interest should Mr. Castro pay?
A. Php 805 C. Php 8,500
B. Php 8,050 D. Php 80,500
10. How much money must be invested by a businessman to obtain an amount of
Php 80,000 in 5 years if the money earns at 2.5% compounded annually?
A. Php 97,656.25 C. Php 70,708.34
B. Php 79,007 D. Php 26,214.40
11. Find the maturity value if Php 90,000 is invested at 7% compounded annually
for 10 years?
 A. Php 177,043.62 C. Php 96,502.20
B. Php 126,350.89 D. Php 6,746.75

12. How is the present value of Php 45,000 that will due in 4 years at 1.5% compounded monthly?
A. Php 1,779.21 C. Php 40,844.26
B. Php 24,788.54 D. Php 42,381
13. Find the maturity value if Josh deposited Php 120,000 in a bank at 3% compounded semi-
annually for 9 years.
A. Php 1,568.09 C. Php 15,688.09
B. Php 15,688 D. Php 156,880.88
14.When annual interest rate is 16% compounded quarterly the interest rate in a conversion period
is ___________. A. 1% B. 2% C. 3% D. 4%
15.When the total number of conversion periods is 12 and the term is 6 years, the money is
compounded ________________.
A. monthly B. quarterly C. annually D. semi-annually

References
General Mathematics TG. (2020). 16th ed. C.P. Garcia Ave., Diliman, Quezon City: Commission on
Higher Education, pp.159 - 186.