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Gen Math Module 2

This document provides information and examples about simple interest concepts and calculations. It discusses: 1. Basic concepts of interest including simple and compound interest, principal, interest rate, time/term, and future value. 2. Five examples of simple interest calculations to illustrate determining future values after a certain number of years, calculating interest earned on an investment, and solving for unknown time/term in a loan problem. 3. An activity that asks readers to provide examples where simple interest concepts could apply and to answer questions about using loans and credit cards.
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0% found this document useful (0 votes)
55 views19 pages

Gen Math Module 2

This document provides information and examples about simple interest concepts and calculations. It discusses: 1. Basic concepts of interest including simple and compound interest, principal, interest rate, time/term, and future value. 2. Five examples of simple interest calculations to illustrate determining future values after a certain number of years, calculating interest earned on an investment, and solving for unknown time/term in a loan problem. 3. An activity that asks readers to provide examples where simple interest concepts could apply and to answer questions about using loans and credit cards.
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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LET’S FOCUS!

This module will allow you to explore the basic concepts and applications of
logarithm. Through this module, you are expected to:
1. Illustrate simple and compound interests.
2. Solve simple and compound interest word problems.

LET’S PREPARE!

At the end of this module, you are expected to SOLVE A SET OF SIMPLE AND
COMPOUND INTEREST REAL-LIFE WORD PROBLEMS. Be guided by the following information.

REMINDERS CRITERIA

1. You are expected to answer the first 8 – 10 points


three problems in the list found on the The answer is correct. The solution provided
last page. contains complete details, showing your
clear understanding of the problem and
2. Aside from the three, choose two other the concepts and skills covered in this
problems that you want to add to your module.
problem set.
5 – 7 points
The answer is partially correct. The solution
3. Each problem that you will answer is
provided essential details, showing your
worth 10 points.
adequate understanding of the problem
and the concepts and skills covered in this
4. If you want to do more, each additional
module. However, there are a few errors.
problem that you will choose to answer
will give you 10 bonus points. 1 – 4 points
The answer is incorrect. The solution
provided a few details but they do not
show a clear understanding of the
concepts and skills covered in this module.
LET’S EXPERIENCE!

This schedule will help you accomplish your tasks in this module.

WEEK DATE TASK


1 October 26 – 30, 2020 Activity 1, 2, and 3, Reading 1
2 November 2 – 6, 2020 Reading 2, Activity 4, Problem Set

ACTIVITY 1. STARTING POINTS


Based on your initial ideas, give 5 different examples wherein you can apply the
concepts of interests. Write your answer below.

Example:
Amount invested in a certain bank at 5 % interest
ACTIVITY 2. EXPLORING INTERESTS
Read and understand the statement below. Answer the following questions.

1. Your family wants to buy a brand new laptop for your class activities but you
don’t have enough savings to pay for it. How can your family have the desired
laptop?

2. As the country moves toward cashless environment, cashless transaction is now


the new normal. Credit and debit cards are one of these. How do you think
credit card companies earn from their services?

READING 1. BASIC CONCEPT OF INTERESTS

Interest is the payment for using one’s money.

Depositing money in a bank is like lending money to the bank in return


for which the bank pays interest.

By contrast, borrowing money from banks or lending companies


requires payment of interest. In these cases, money has present and
future values.

The most common types of interests are Simple Interest and


Compound Interest.
Deposit Loan

Investor
Borrower
/ Saver

Interest Interest
Withdraw Payment

Notations and Definitions of Terms

→ payment or charge for borrowing money


𝐼 Interest
→ amount earned in investing money
→ amount borrowed or invested
𝑃 Principal
→ initial amount
→ fractional part of the principal that is paid on
𝑟 Interest rate loan or investment
→ usually in percent
→ the number of years the money is borrowed
𝑡 Time or term
or invested
Final amount → the sum of the principal and the interest
𝐹 or future earned after a period of time
value → the amount after 𝑡 years

References:
Aoanan, Grace O., Plarizan, Ma. Lourdes P., Regidor, Beverly T., & Simbulas, Lolly Jean C.
(2016). General Mathematics for Senior High School. Quezon City: C&E Publishing Inc.
Crisologo, Leo Andrei A., Hao, Lester C., Miro, Eden Delight P., Ocampo, Shirley R., Palomo,
Emellie G., & Tresvalles, Regina M. (2016). General Mathematics. Commision on Higher
Education.
ACTIVITY 3. EXPLORING SIMPLE INTERESTS
Study the following examples below to perform the next exercises.
Example 1. You invested ₱200.00 in a certain bank at 10% annual simple interest.

NOTE:
Annual means “occurring once a year”
In this example, the Principal 𝑃 is ₱200.00 and the interest rate 𝑟 is 10%.
The interest is 10% of ₱200 which is ₱20 per year.

Principal → ₱200

1st year → ₱200 + (10% of ₱200) The amount after 1 year


= ₱200 + ₱20 is ₱220
= ₱220

2nd year → ₱220 + (10% of ₱200) The amount after 2 years


= ₱220 +₱20 is ₱240
= ₱240

3rd year → ₱240 + (10% of ₱200) The amount after 3 years


= ₱240 +₱20 is ₱260
= ₱260
The principal increases by a fixed amount every year.

Example 2. From example number 1, what will be the future value after 12 years?

NOTE:
There are two common ways in solving this problem. First, by continuously adding
the fixed amount which is ₱20 every year until the twelfth year. The second option is
to use the formulas in simple interest.
𝐼 = 𝑃𝑟𝑡 𝐹 =𝑃+𝐼
𝐹 = 𝑃(1 + 𝑟𝑡)
Given:
𝑃 = ₱200.00
𝑟 = 10% 𝑜𝑟 0.10
𝑡 = 12 𝑦𝑒𝑎𝑟𝑠

Solution:
𝐹 = 𝑃(1 + 𝑟𝑡)
𝐹 = 200(1 + (0.10)(12))
𝐹 = 200(1 + 1.2)
𝐹 = 200(2.2)
𝐹 = 440
Therefore, the investment after 12 years is ₱440.00.

Example 3. How much interest will Cyra earn in her investment of ₱15,500 at 8% simple
interest for 3 years?

Given:
𝑃 = ₱15,500
𝑟 = 8% 𝑜𝑟 0.08
𝑡 = 3 𝑦𝑒𝑎𝑟𝑠
Solution:
Use the formula for interest 𝐼 = 𝑃𝑟𝑡.
𝐼 = 𝑃𝑟𝑡
𝐼 = 15500(0.08)(3)
𝐼 = 3720
Therefore, the interest after 3 years is ₱3720.
Example 4. Kevin borrowed ₱50,000 from the NTC Cooperative Management that charges
11% interest with an agreement to pay the full amount with interest at the end of
the term. If he paid ₱88,500 at the end of the term, how many years is the
agreed loan term?

Given:
𝑃 = ₱50,000
𝑟 = 11% 𝑜𝑟 0.11
𝐹 = ₱88,500
𝑡 = 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
Solution:
Use the formula 𝐹 = 𝑃(1 + 𝑟𝑡), solve for 𝑡.
𝐹 = 𝑃(1 + 𝑟𝑡)

88500 = 50000(1 + (0.11)𝑡)

88500 50000(1 + (0.11)𝑡)


=
50000 50000

88500 50000(1 + (0.11)𝑡)


=
50000 50000
1.77 = (1 + (0.11)𝑡)
1.77 = 1 + 0.11𝑡
1.77 − 1 = 0.11𝑡
0.77 = 0.11𝑡

0.77 0.11𝑡
=
0.11 0.11

0.77 0.11𝑡
=
0.11 0.11
7 = 𝑡
Therefore, the loan term is 7 years.
Example 5. Derick made a loan of ₱67,800 from Fifty-Shades Lending Company. He intends
to pay his obligation for 30 months with interest of ₱7,627.50. What must be the
interest rate of his loan?

Given:
𝑃 = ₱67,800
𝑟 = 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
𝐼 = ₱7,627.50
𝑡 = 30 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑟 2.5 𝑦𝑒𝑎𝑟𝑠
Solution:
Use the formula 𝐼 = 𝑃𝑟𝑡, solve for 𝑟.
𝐼 = 𝑃𝑟𝑡
7627.50 = 67800(𝑟)(2.5)
7627.50 = 67800(2.5)(𝑟)
7627.50 = 169500𝑟

7627.50 169500𝑟
=
169500 169500

7627.50 169500𝑟
=
169500 169500
0.045 = 𝑟
𝑟 = 4.5%

Therefore, the interest rate is 4.5%.

Exercise 1. Complete the table below by solving the unknown quantities in each row.
Principal (₱) Interest Rate Time Interest (₱) Final Amount (₱)
₱20,000 2.5% 2 years
8% 1.5 years ₱1,960
₱340,000 12% ₱408,000
₱2,500 6 years ₱3,100
20 years ₱522 ₱1,392
Exercise 2. Based on the examples above, solve the following problems. Write your
answer and solution on the space below.
1. Kerobine made a loan of ₱79,250 from a bank that charges 4% simple interest. How
much must he pay the bank after 4 years? How much is the interest after 4 years?
2. Baby Lyrica received ₱29,200 for an investment for 8 years at 7.5% interest rate. Find
the amount invested.
3. How long will a principal amount double its value at 5% simple interest?
READING 2. SIMPLE AND COMPOUND INTEREST

Simple interest is a percentage of the principal amount added to


that principal every period. In simple interest, the principal increases
by a fixed amount every term.
In contrast, compound interest is based on the principal amount and
the interest that accumulates in every period.

Example:
Suppose you received ₱2000.00 and you plan to invest it for 5 years.
a. Red-V Lending Company offers 10% simple interest rate per year.
b. Big-Bank offers 10% compounded annually.

Red-V (simple interest) Big-Bank (compound interest)

₱2000.00 ← Principal → ₱2000.00

₱2000 + (10% of ₱2000) ₱2000 + (10% of ₱2000)


= ₱2000 + ₱200 ← 1st year → = ₱2000 + ₱200
= ₱2200 = ₱2200

₱2200 + (10% of ₱2000) ₱2200 + (10% of ₱2200)


= ₱2200 + ₱200 ← 2nd year → = ₱2200 + ₱220
= ₱2400 = ₱2420

₱2400 + (10% of ₱2000) ₱2420 + (10% of ₱2420)


= ₱2400 + ₱200 ← 3rd year → = ₱2420 + ₱242
= ₱2600 = ₱2662

₱2600 + (10% of ₱2000) ₱2662 + (10% of ₱2662)


= ₱2600 + ₱200 ← 4th year → = ₱2662 + ₱266.20
= ₱2800 = ₱2928.20
…and so on
Businesses, companies, banks and other financial institutions use
compound interest instead of simple interest. The formulas below are
use in solving compound interest problems.
Compounding annually / compounding once a year
𝐹 = 𝑃(1 + 𝑟)𝑡 𝑃 = 𝐹(1 + 𝑟)−𝑡
Compounding more than once a year
𝑟 𝑚𝑡 𝐹
𝐹 = 𝑃 ቀ1 + 𝑚ቁ 𝑃= 𝑟 𝑚𝑡
ቀ1+ ቁ
𝑚

𝐼 Interest
𝑃 Principal or present value
𝑟 Interest rate
𝑡 Time or term
𝐹 Final amount or future value or maturity value
𝑚 Frequency of conversion

Frequency of conversion
compounded annually once a year 𝑚=1
compounded semi-annually twice a year 𝑚=2
compounded quarterly four times a year 𝑚=4
compounded monthly twelve times a year 𝑚 = 12
compounded bimonthly six times a year 𝑚=6

References:
Aoanan, Grace O., Plarizan, Ma. Lourdes P., Regidor, Beverly T., & Simbulas, Lolly Jean C.
(2016). General Mathematics for Senior High School. Quezon City: C&E Publishing Inc.
Crisologo, Leo Andrei A., Hao, Lester C., Miro, Eden Delight P., Ocampo, Shirley R., Palomo,
Emellie G., & Tresvalles, Regina M. (2016). General Mathematics. Commision on Higher
Education.
ACTIVITY 4. EXPLORING COMPOUND INTEREST
Examine the following examples below to perform the next exercises.
Example 1. Timothy borrows ₱15,000 from Got8 Cooperatives and promises to pay the
principal and the interest at 12% compounded quarterly. How much must he
pay after 5 years?

Given:
𝑃 = ₱15,000
𝑟 = 12% 𝑜𝑟 0.12
𝑡 = 5 𝑦𝑒𝑎𝑟𝑠
𝑚 = 4
Solution:
𝑟 𝑚𝑡
Use the formula = 𝑃 ቀ1 + 𝑚ቁ , solve for the future value.

𝑟 𝑚𝑡
𝐹 = 𝑃 ቀ1 + ቁ
𝑚

0.12 4(5)
𝐹 = 15000 (1 + )
4
𝐹 = 15000(1 + 0.03)20
𝐹 = 15000(1.03)20
𝐹 = 27091.66852

Therefore, in 5 years, the future value is ₱27,091.67.

Example 2. Find the maturity value and the interest if ₱2,000 is deposited in a bank at 3%
compounded annually for 18 months.

Given:
𝑃 = ₱2,000
𝑟 = 3% 𝑜𝑟 0.03
𝑡 = 18 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑟 1.5 𝑦𝑒𝑎𝑟𝑠
Solution:
In solving the problem, use the formula 𝐹 = 𝑃(1 + 𝑟)𝑡 .
𝐹 = 𝑃(1 + 𝑟)𝑡
𝐹 = 2000(1 + 0.03)1.5
𝐹 = 2000(1.03)1.5
𝐹 = 2090.6716

Therefore, the maturity value is ₱2,090.67.

Example 3. How much will be invested to accumulate ₱45,000 at the end of 6 years if
money earns 4% interest rate, compounded semi-annually?

Given:

𝑃 = 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
𝑟 = 4% 𝑜𝑟 0.04
𝑡 = 6 𝑦𝑒𝑎𝑟𝑠
𝐹 = ₱45,000
𝑚 = 2
Solution:
The problem ask for the principal or present value of the investment. Use the
𝐹
formula 𝑃 = 𝑟 𝑚𝑡
.
ቀ1+ ቁ
𝑚

𝐹
𝑃 =
𝑟 𝑚𝑡
ቀ1 + 𝑚ቁ

45000
𝑃 =
0.04 2(6)
ቀ1 + 2 ቁ
45000
𝑃 =
(1 + 0.02)12

45000
𝑃 =
(1.02)12

𝑃 = 35482.1929

Therefore, the present value is ₱35,482.19.

Example 4. In preparation for your graduation, 2 years from now, you invested ₱8,000 and
wish to have ₱15,000 by that time. At what rate compounded monthly should
the money be invested?

Given:
𝑃 = ₱8,000
𝑟 = 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
𝑡 = 2 𝑦𝑒𝑎𝑟𝑠
𝐹 = ₱15,000
𝑚 = 12
Solution:
𝑟 𝑚𝑡
Given the formula for the future value 𝐹 = 𝑃 ቀ1 + 𝑚ቁ , the formula for the
1
𝐹
interest rate can be derived as 𝑟 = 𝑚 (ቀ𝑃ቁ
𝑚𝑡
− 1).

1
𝐹 𝑚𝑡
𝑟 = 𝑚 (( ) − 1)
𝑃
1
15000 12(2)
𝑟 = 12 (( ) − 1)
8000

𝑟 = 0.3184566

Therefore, the interest rate must be 31.85%.


Example 5. In how many years will ₱27,000 accumulate a ₱10,000 interest if invested at 5%
compounded semi-annually?

Given:
𝑃 = ₱27,000
𝑟 = 5% 𝑜𝑟 0.05
𝑡 = 𝑢𝑛𝑘𝑛𝑜𝑤𝑛
𝐼 = ₱10,000
𝐹 = ₱27,000 + ₱10,000 = ₱37,000
𝑚 = 2
Solution:
The future value is the sum of the principal and accumulated interest. Given
𝑟 𝑚𝑡
the formula = 𝑃 ቀ1 + 𝑚ቁ , the formula for the term of investment can be derived as
𝐹
𝑙𝑜𝑔ቀ ቁ
𝑡= 𝑃
𝑟 .
𝑚[𝑙𝑜𝑔ቀ1+ ቁ]
𝑚

𝐹
𝑙𝑜𝑔 ቀ𝑃 ቁ
𝑡 = 𝑟
𝑚 [𝑙𝑜𝑔 ቀ1 + 𝑚ቁ]

37000
𝑙𝑜𝑔 ቀ27000ቁ
𝑡 =
0.05
2 [𝑙𝑜𝑔 ቀ1 + 2 ቁ]

𝑡 = 6.38

Therefore, the term of investment is 6.38 years or approximately 6 years and 5


months.

Exercise 1. Based on the examples above, solve the following problems. Write your
answer and solution on the next page.

1. Find the maturity value of ₱100,000 invested at 9% interest compounded annually for
30 months.
2. Accumulate the amount if ₱25,000 invested at 8% interest compounded quarterly
after 5 years.
3. How much should Jamie set aside and invest in a fund earning 3% compounded
monthly if she needs ₱100,000 in 2 years?
PROBLEM SET. “LET’S TRY!” SIMPLE AND COMPOUND INTEREST WORD
PROBLEMS
This time you are very much prepared to accomplish the final assessment for this module. You
go back to page 1, “Let’s Prepare” for the reminders and rubrics and be able to apply the
skills learned in the lessons given. Use the space provided after the word problems.

1. How much interest will be earned in an investment of 25,000 at 11% simple interest for 5
years?

2. April made a loan from a bank that charges 8% simple interest. How much must she pay
after 36 months?

3. To buy a car, Jimmy borrowed 680,000 for 5 years with an interest rate of 18%
compounded quarterly. How much will he pay if he pays the entire loan with interest at
the end of the fifth year?

4. Mr. Song deposited 80,000 into a savings account for his child’s educational fund. How
much will Mr. Song have in his account after 18 years at 2.25% compounded semi-
annually?

5. In how many years will 17,500 accumulate to 75,000 if invested at 10% compounded
annually?

6. How much will be invested by Angel to accumulate 30,000 at the end of 3 years if that
money earns 12% interest rate, compounded quarterly?

7. Michelle borrowed 350,000 intended for the wedding. If she repaid 612,500 after 6 years,
at what interest rate did she borrow the money?

8. A 20-year old student wishes to have 600,000 at the age of 60. How much should the
student invest in his account if the interest rate is 5%?

9. At what rate compounded semi-annually will 46,500 accumulate to 75,500 in 27


months?

10. How long will it take 2,000 to earn 600 if the interest is 12% compounded semi-annually?

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