Aran, Dawn Juliana V.
BSBA FM 1-4
Simple Interest
Formulas
I = Interest I = Prt
P = Principal 𝐼
P=
𝑟𝑡
r = Rate 𝐼
r=
𝑃𝑡
t = time 𝐼
t = 𝑃𝑟
F = Full Amount F= P+I
A = Maturity Value A = P (1+rt)
Examples Problems with Solutions:
1. Don deposited ₱4,000.00 into a savings account at a local bank that earned 5% interest
per year. How much interest does she earn per year?
Solution: P = ₱4,000.00 r = 5% or 0.05 t = 1
I=Prt
I = (4,000) (0.05) (1)
I = 200
Answer: Don earns ₱200.00 per year in interest from her local bank.
2. Julia wants to buy a computer so she decided to borrow ₱3,000.00 at 9% interest for 4
years. What was the amount she was required to repay?
Solution: P = ₱3,000.00 r = 0.09 t = 4
I=Prt
I = (3000) (0.09) (4)
= 1,080 - Interest
F = P+I
= 3,000.+1,080
F = 4,080
Answer: Julia had to pay back ₱3,000.00 in principal plus ₱1,080.00 in interest for a total
of ₱4,080.00.
3. A total of ₱1,200.00 is invested at a simple interest rate of 6% for 4 months. How much
interest is generated on this investment?
Solution: Before we can apply the formula, we will need to write the time of 4 months in
terms of years. Since there are 12 months in a year:
4
t= 12
= ⅓ or 0.33
When converted to years, this allows us to use the formula with P = ₱1,200.00, r = 6% or
0.06, t = 0.33.
I = Prt
I = (1,200) (0.06) (0.33)
I = 24
Answer: The interest earned is ₱24.00.
4. Hannie puts ₱2,000.00 into her savings account that earns 5% in interest. How much
money will she have after 6 months?
Solution: Remember that the interest formula asks for the time in years. However, the
time was given in months. So to get the time in years we represent 6 months as 6/12 of
a year, ½ or 0.5.
P = ₱2,000.00 I = 5% or 0.05 t = 0.5
I = Prt
I= (2,000) (0.05) (0.5)
= 50.00
F = P+1
= 2,000+ 50
F = 2,050
Answer: Hannie will have ₱2,000.00 in principal plus ₱50.00 of interest earned for a total
of ₱ 2,050.00.
5. Find the ordinary interest and the full amount in ₱5,000.00 a 4% interest for two years.
Solution: P = ₱5,000.00 r = 4% or 0.04 t = 2
I = Prt
I= (5,000) (0.04) (2)
I = 400
F = P+1
= 5,000 + 400
F = 5,400
Answer: ₱5,000.00 principal plus ₱400.00 of interest earned for a total of ₱5,400.00.
6. Dawn paid ₱1,000.00 for a loan she had. The rate of simple interest was 5.5% and the
loan was for 3 years, what was the principal she borrowed?
Solution: P = ?, I = ₱ 1,000.00 r = 5.5% or 0.055 t = 3 years
𝐼
P = 𝑟𝑡
1,000
= (0.055)(3)
1,000
=
0.165
P = 6,060.61
Answer: The principal that she borrowed is ₱6,060.61.
7. Mikko earned ₱7,000.00 in interest. He originally deposited ₱14,000.00 in the account
and left it there for 20 years. What was the simple interest rate that he earned?
Solution: I = ₱7,000.00 P = ₱14,000.00 r = ?, t = 20 years
𝐼
r=
𝑃𝑡
7,000
= (14,000)(20)
7,000
= 280,000
r = 0.025 or 2.5%
Answer: The simple interest rate that he earned is 2.5%.
8. Ariela earned ₱2,000.00 interest. She originally deposited ₱20,000.00 in her bank
account and the bank account earned 2% interest. How long did she leave the money in
her bank account?
Solution: I= ₱2,000.00 P = ₱20,000.00 r = 2% or 0.02, t = ?
𝐼
t = 𝑃𝑟
2,000
= (20,000)(0.02)
2,000
= 400
t=5
Answer: Ariela left the money in her bank account in 5 years.
9. A company borrows ₱10,000.00 at a basic interest rate of 7.5%. If the loan is for 8 years,
how much money would the business need to repay in total?
Solution: P = ₱10,000.00 r = 7.5% or 0.075 t = 8 years
A = P (1+rt)
= 10,000(1+0.075(8))
= 10,000 (1.6)
A = 16,000
Answer: The company will pay back a total of ₱16,000.00
10. A loan of ₱2,500.00 to be repaid in 6 months with interest of 4%.
Solution: The loan is for 6 months, or 6/12 = 1/2 of a year.
P = ₱2,500 r = 0.04 t = ½ or 0.5 year
A = P (1+rt)
= 2,500 (1+0.04(0.5))
= 2,500 (1.020)
A = 2,550
Answer: The maturity value is ₱2,550.00
Compound Interest
A = future value of Annually = 1 (1 year) 𝑟
loan/investment
A = P (1+
𝑛
)^𝑛𝑡
P = Principal Semi-annually = 2 (every 6 𝐴
P=
months) (1+ 𝑛 )
𝑟 𝑛𝑡
r = annual interest rate Quarterly = 4 (every 4 𝑛𝑡 𝐴
months) r=n( 𝑃
-1))
t = time Monthly = 12 (monthly) t = log (1+
𝑟 𝐴
) ( 𝑃 )/𝑛
𝑛
n = number of times interest is ^ = to the power of.. I=A-P
compounded per year
Examples Problems with Solutions:
11. Kiko deposits ₱4,000.00 in his bank account paying 6% annual interest compounded
quarterly. How much money will be in his bank account after 5 years?
Solution: P = ₱4,000 r = 0.06 n = 4 t = 5.
𝑟 𝑛𝑡
A = P (1+
𝑛
)
0.06 4(5)
= 4,000 (1+ 4 )
20
= 4,000 (1.015)
= 4,000 (1.346855007)
A = 5387.42 (Round your final answer to two decimals places.)
Answer: After 5 years, there will be ₱5,387.42 in Kiko bank account.
12. If Claw invested at an 8% compounded semi-annual rate for one and a half years, how
much interest will be earned?
Solution: P = ₱70,000.00 r = 0.08 n = 2 t = 1 ½ years or 1.5 years
𝑟 𝑛𝑡
A = P (1+
𝑛
) I = A-P
0.08 2(1.5)
= 70,000 (1+ 2 ) = 78,740.48-70,000
+
3
= 70,000 (1.04) I = 8,740.48
= 70,00 (1.124864)
A = 78,740.48
Answer: Claw will have ₱78,740.48 after 1 ½ years with the interest of ₱ 8,740.48.
13. If you deposit ₱6,500.00 into an account paying 8% annual interest compounded
monthly, how much money will be in the account after 7 years?
Solution: P = ₱6,500.00 r = 0.08 n = 12 t = 7 years
𝑟 𝑛𝑡
A = P (1+ 𝑛 )
0.08 12(7)
= 6,500 (1+ 12
)
84
= 6,500 (1.00666666)
A = 11,358.24
Answer: After 7 years there will be ₱11,358.24 in the account.
14. Dana deposits ₱25,000.00 in his bank account paying 5% annual interest compounded
annually. How much money will be in the account after 5 years?
Solution: P = ₱25,000.00 r = 0.05 n = 1 t = 5 years
𝑟 𝑛𝑡
A = P (1+ 𝑛 )
0.05 1(5)
= 25,000 (1+ 1
)
5
= 25,000 (1.05)
= 25,000 (1.2762815625)
A = 31,907.04
Answer: After 5 years, there will be ₱1,907.04 in Dana bank account.
15. Damian won ₱10,000.00 in the drawing competition. He invested all the money in his
bank that compounded annually with a 2% interest rate. In the nth year he decided to
withdraw his money and found out that he has ₱11,040.81.How many years did he
invest his money?
Solution: P = ₱10,000.00 n = 1 r = 2% or 0.02 A = ₱11,040.81 t=?
𝑟 𝐴
𝑙𝑜𝑔 (1+ 𝑛 ) ( 𝑃 )
t=
𝑛
0.02 11,040.81
𝑙𝑜𝑔 (1+ 1
)( 10,000
)
= 1
𝑙𝑜𝑔 (1.02)(1.104081)
= 1
𝑙𝑜𝑔 (1.12616262)
= 1
= log (1.12616262)
t = 0.516 or 5 years
Answer: Damian invested his money in 5 years.
16. Someone invested money in an account that pays 6.5% interest per year, the money is
invested for 3 years, and interest is compounded quarterly. At the end of 3 years, the
account has ₱6,067.04 in it. What was the principal amount invested?
Solution: A = ₱6,067.04 P= ? r = 6.5% or 0.065 n= 4 t = 3
𝐴
P=
𝑟 𝑛𝑡
(1+ 𝑛 )
6,067.04
=
0.065 4(3)
(1+ 4
)
6,067.04
= 12
(1.01625)
6,067.04
=
1.2134
P = 5,000
Answer: The principal amount invested is ₱5,000.00.
17. Hanna invests ₱1,000.00 in an account for 3 years. The interest is compounded monthly.
At the end of 3 years, the total amount in the account is ₱ 1,161.47. What was the yearly
interest rate?
Solution: A = ₱1,161.47 P = ₱1,000.00 r = ? n = 12 t = 3 years
𝑛𝑡 𝐴
r=n( 𝑃
-1))
12*3 1,161.47
= 12 ( 1,000.00
- 1)
= 12 ( 1. 161470 -1)
36
= 12 (1.004167-1)
= 12 (0.004167)
= 0.049999 or 0.05
r = 5%
Answer: The yearly interest rate is 0.05 or 5%.
18. Accumulate ₱ 4,000.00 at 12% compounded semi annually for 4 years and 10 months.
Solution: P = 4,000.00 r = 12% or 0.12 n = 2 t = 4 years and 10 months
𝑟 𝑛𝑡
A = P (1+ 𝑛 )
10
0.12 2 (4 12 )
= 4,000 (1+ 2 )
29
𝑜𝑟 9.66667
= 4,000 (1.06) 3
A = 7,025.6
Answer: The answer is ₱7,025.6.
19. An investment earns 3% compounded monthly. Find the value of an initial investment of
₱5,000.00 after 6 years.
Solution: P = ₱5,000.00 r = 3% or 0.03 n = 12 t = 6 years
𝑟 𝑛𝑡
A = P (1+
𝑛
)
0.03 12(6)
= 5,000.00 (1+ 12 )
72
= 5,000 (1.0025)
= 5,000 (1.19694847)
A = 5984.74
Answer: The initial investment is ₱5,984.74.
20. What is the value of an investment of ₱3,500.00 after 2 years if it earns 1.5%
compounded quarterly?
Solution: P = ₱3,500.00 r = 1.5% or 0.015 n = 4 t = 2 years
𝑟 𝑛𝑡
A = P (1+
𝑛
)
0.015 4(2)
= 3,500 (1+ 4
)
8
= 3,500(1.00375)
= 3,500(1.03039672)
A = 3,606.38852 or 3,606.39
Answer: The value of investment after 2 years is ₱3,606.39.
References:
https://www.mathbootcamps.com/simple-interest-formula-and-examples/
https://www.mathgoodies.com/lessons/percent/interest
http://www2.im.uj.edu.pl/DawidTarlowski/finance.pdf
https://www.youtube.com/@whatsupdude2778
