11

General Mathematics
Second Quarter
Module 10: Problems on
Business and Consumer
Loans (Amortization and
Mortgage)

1
 Republic of the Philippines
Department of Education
REGION VII-CENTRAL VISAYAS
SCHOOLS DIVISION OF SIQUIJOR

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 11

General Mathematics
Second Quarter
Module 10: Problems on
Business and Consumer
Loans (Amortization and
Mortgage)

3
 INTRODUCTION

This module is written in support of the K to 12 Basic Education Program to

ensure attainment of the standards expected of you as learner.

This learning material aims to equip you with the essential knowledge on
Solving Problems on Business and Consumer loans (Amortization and Mortgage).

This includes the following activities/tasks:

▪ Expected Learning Outcome – This lays out the learning outcome that
you are expected to have accomplished at the end of the module.
▪ Pre-test – This determines your prior learning on the particular lesson
you are about to take.
▪ Discussion of the lesson – This provides you with the important
knowledge, principles and attitude that will help you meet the expected
learning outcome.
▪ Learning Activities – These provide you with the application of the
knowledge and principles you have gained from the lesson and enable
you to further enhance your skills as you carry out prescribed tasks.
▪ Post-test – This evaluates your overall understanding about the module.

With the different activities provided in this module, may you find this material
engaging and challenging as it develops you critical thinking skills.

4
 What I need to know

After going through this module, you will be able to

➢ solve problems on business and consumer loans (amortization and
mortgage). (M11GM-IIf-3)

What I know

Pre-Test
A. Choose the letter that corresponds to the correct answer.

1. Find the monthly amortization (that is, the monthly payment) for a Php450,000
debt which is to be repaid in 2 years at 9% compounded monthly.
a. Php15,558.13 c. Php25,558.13
b. Php20,558.13 d. Php30.585.13

2. This refers to the amount of debt still unpaid or ant remaining debt at a
specific time.
a. Amortization c. Mortgage
b. Loan d. Outstanding Balance

3. It is a debt provided by one entity (an individual or an organization) to another

entity at an interest rate.
a. Amortization c. Mortgage
b. Loan d. Outstanding Balance

4. It is a business loan or a consumer loan that is secured with a collateral.

a. Amortization c. Mortgage
b. Loan d. Outstanding Balance
B. Compute the following. Write your answers with the solution on your notebook. (4
points each)
1. A catering business took out a bank loan and plans to repay it through 5
annual amortizations amounting to Php192, 819.34 each. If the bank charged
an interest of 9% compounded annually, find the outstanding principal after
the 3rd year?

5
 2. A growing business moved to a new building to service a bigger client pool.
The building was acquired through a Php15 million bank loan with 12% interest
compounded monthly. If the agency amortizes the loan with monthly Php200,
000 payments, what is the outstanding balance in 5 years?

Scoring Rubrics:

Level 4 3 2 1 0
Accuracy Complete Arrived at Incomplete Attempted No
solution the correct solution to solve evidence
with the answer and did of
correct but with not arrive attempting
answer incomplete at the to show
solution correct the
answer solution

What’s In

Let us recall on what is the difference between the business and consumer
loan. Do the activity below.

Activity 1

A. Identify the following whether it is a business or a consumer loan.

1. Mrs. Dalisay wants to have another branch for his cell phone repair shop. He
decided to apply for a loan that he can use to pay for the rentals of the
branch.
2. Trillas runs a trucking business. He wants to buy three more trucks for
expansion of his business. He applied for a loan in a bank.
3. Mrs. Baguio decided to take her family for a vacation. To cover the expenses,
she decided to apply for a loan.
4. Glenn decided to purchase a condominium unit near his workplace. He got a
loan worth Php2, 000, 000.
5. Mr. Gary purchased renovated her house P80, 000. This was made possible
because of an approved loan worth P75, 000.
6. Ms. Capili and her family wants to open a small cafeteria near the high school
in their community. She has a good place for the cafeteria because she will
just use the ground floor of their two-storey house. But, the family lacks the
capital for starting the business. They decided to borrow money from the
bank.

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 7. Mr. Sherwin Canlapan is a 25-year old bachelor who works in an insurance
company. He wants to buy a brand new car. He decided to apply for an auto
loan.
8. Ms. Charity plans to have a salon. She wants to borrow some money from the
bank in order for her to buy the equipment and furniture for the salon.

B. Choose the letter that corresponds to the correct answer.

1. At what rate percent per annum will Php250 amount to Php330 in 4 years?
a. 10% b. 11% c. 12% d.13%
2. In how many years will Php400 yield an interest of Php13230 at 10% simple
interest?
a. 2 years b. 4 years c. 6 years d.8years
3. At what rate of simple interest will the sum of money double itself in 6 years?
2 2 2 2
a. 15 3% b16 3% c. 17 3% d. 18 3%
. 4. Find the simple interest at the rate of 5% for 3 years on that principal which in 4
years, 8 months at the rate of 5%, gives Php1200 as simple interest.
a. Php771.42 b. Php780.42 c. Php880.42 d. Php990.42
5. Simple interest on a sum of money at the end of 5 years is 4/5 of the sum itself.
Find the rate percent.
a. 10% b. 13% c. 16% d.19%

What’s New

We are now ready to solve problems on Business and Consumer Loans

particularly in Amortization and Mortgage. You can solve it by using the different
formulas.
Some examples on real life situation where you can apply this in business loans
and consumer loans are car loan, housing loan, SSS and GSIS salary loan, credit card
cash loan and others. Once you get a loan you should fulfil your obligation by paying
regularly.
The following are examples of business and consumer loans.
(a) Mr. Apolto decided to buy a house and lot for his family. The loan amounts to
Php2, 500,000. He amortized the loan by paying Php23, 000 monthly for 20
years.
(b) Ms. Salceda bought a car for Php800, 000. After deducting the down payment,
her total loan amounts to Php750, 000. She amortized the loan by paying
Php18, 000 monthly for 5 years.
(c) Mr Francisco applied for a salary loan from his social security insurance. He got
a Php20, 000 loan. To pay for this loan, he has to pay Php1, 100 monthly for 2
years.

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 What is It?

Definition of Terms
Loan – is a debt provided by one entity (an individual or an organization) to
another entity at an interest.
Amortization Method – method of paying loan (principal and interest) on
instalment basis, usually of equal amounts at regular intervals.
Mortgage – a loan, secured by a collateral, that the borrower is obliged to pay
at specified terms.
Chattel Mortgage – a mortgage on a movable property.
Collateral – assets used to secure the loan. It may be a real – estate or other
investments.
Outstanding Balance – any remaining debt a specified time

AMORTIZATION
A debt-repayment scheme wherein the original amount borrowed is repaid by
making equal payments periodically is called an amortization.
Example 1.
Find the monthly amortization (that is, the monthly payment) for a
Php450, 000 debt which is to be repaid in 2 years at 9% compounded
monthly.
Solution:
𝑃𝑖
We will use the formula R = 1−(1+𝑖)−𝑛 where R is the regular payment, P
is the present value of the loan, r is the rate of interest, n is the number of
payments per year, and t is the time in years.

Given: P = 450, 000, t = 2, j = 0.09, and n = 12.

𝑃𝑖
R = 1−(1+𝑖)−𝑛

450,000(0.0075)
= 1−(1+0.0075)−12(2)

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 3375
=1−(1.0075)−24

3375
= 1−0.835837404
3375
= 0.164168596

= Php20, 558.13

An Amortization schedule is a table which shows how a debt is completely

repaid though periodic payments, parts of which go to interest payments and
principal repayments. Here is a part of such a table:
SAMPPLE AMORTIZATION TABLE

CLIENT NAME : NOCON EWIN C RELEASE DATE : 09/22/10 INTEREST RATE: 9.75
PN NO : 815523459876 PN-MAT DATE : 09/22/20 EFFECTIVE DATE: 09/22/1
ORIG LN AMT : 980,000.00 TERM : 120 M INT REVIEW DATE: 09/22/11
OS BALANCE : 980,000.00 UNIT : BBF

DUE DATE TOTAL INTEREST PRINCIPAL O/S BALANCE

9/22/11 10,234.72 8.166.67 2,068.05 977,931.95
10/22/11 10,234.72 8,149.43 2,085.29 975,846.66
11/22/11 10,234.72 8,132.06 2,1.2066 973,744.00
12/22/11 10,234.72 8,144.53 2,120.19 971,623.81
01/22/12 10,234.72 8,096.87 2,137.85 969,485.95
02/22/12 10,234.72 8,079.05 2,155.67 967,330.28
03/22/12 10,234.72 8,061.09 2,173.63 965,156.65
04/22/12 10,234.72 8,042.97 2,191.75 962,964.90
05/22/12 10,234.72 8,024.71 2,210.01 960,754.89
06/22/12 10,234.72 8,006.29 2,228.43 958,526.46
07/22/12 10,234.72 7,987.72 2,247.00 956,526.46
08/22/12 10,234.72 7,969.00 2,265.72 954,013.74

Constructing Amortization Table

Example 2.
A Php65, 000 loan at 12% compounded semi-annually is to amortize
every 6 months for 3 years. Find the semi-annual payment and construct an
amortization table.

Solution:
First, we get R:
𝑃𝑖
R = 1−(1+𝑖)−𝑛

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 0.12
65,000( )
2
= 0.12𝑖 −2(3)
1−(1+ )
2

3900
=
1−(1.06)−6

3900
= 1−0.704960544
3900
= 0.2950394596

= Php13, 218.57
Next, we construct the table.

Step 1: Prepare the table with the indicated column headings and 7 more rows (we
have 6 periods).
Period Periodic Interest Principal Outstanding
Payment Payment Repayment Principal
0
1
2
3
4
5
6

Step 2: Place the original debt and the periodic payments.

Period Periodic Interest Principal Outstanding
Payment Payment Repayment Principal
0 65,000
1 13,218.57
2 13,218.57
3 13,218.57
4 13,218.57
5 13,218.57
6 13,218.57

Step 3: Get the interest payment for the first period: (65,000)(0.06) = 3,900
• Subtract this from the regular payment to get the principal repayment for
the first period: 13, 218.57 – 3, 900 = 9,318.57

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 • Finally, deduct the principal repayment 9,318.57 from the debt to get the
outstanding principal at the end of the first period: 65, 000 – 9,318.57 =
55, 681.43
• Place these values in the table.
Period Periodic Interest Principal Outstanding
Payment Payment Repayment Principal
0 65,000
1 13,218.57 3,900 9,318.7 55,681.43
2 13,218.57
3 13,218.57
4 13,218.57
5 13,218.57
6 13,218.57

Step 4: Repeat step 3 for the other rows to get the following:
Period Periodic Interest Principal Outstanding
Payment Payment Repayment Principal
0 65,000
1 13,218.57 3,900 9,318.7 55,681.43
2 13,218.57 3,340.89 9,877.68 45,803.75
3 13,218.57 2,748.22 10,470.35 35,333.40
4 13,218.57 2,120.00 11,98.57 24,234.83
5 13,218.57 1,454.09 77,764.48 12,470.35
6 13,218.57 748.22 12,470.35 0.00

The outstanding principal at the end of the term (end of 6 th period) is 0,

indicating that the debt is completely repaid.

MORTGAGE LOAN
A mortgage loan is a business loan or a consumer loan that is secured with a
collateral. Collaterals are assets that can secure a loan. If a borrower cannot pay the
loan, the lender has a right to the collateral. The most common collateral are real
estate property. For business loans, equipment, furniture and vehicles may also be
used as collaterals. Usually, the loan is secured by the property bought. For example,
if a house and lot is purchased, the purchased house and lot will be used as a
mortgage property or a collateral. During the term of the loan, the mortgagor, the
borrower in a mortgage, still has the right to possess and use the mortgaged property.
In the event that the mortgagor does not make regular payments on the mortgage, the
mortgagee or the lender in a mortgage can repossess the mortgaged property. The

11
most common type of mortgage is the fixed-rate mortgage wherein the interest
remains constant throughout the term of the loan.

Example 1.
Mr. Garcia borrowed P1, 000,000 for the expansion of his business. The
effective rate of interest is 7%. The loan is to be repaid in full after one year. How
much is to be paid after one year?
Solution.
Given: P = 1,000,000
j = 007
n=1
Find F.
Solution.
F = P (1 + j) n
= 1,000,000(1+0.07) = Php1, 070, 000
An amount of P1, 070,000 must be paid after one year.

Example 2 (Chattel mortgage)

A person borrowed P1, 200,000 for the purchase of a car. If his monthly
payment is P31, 000 on a 5-year mortgage, find the total amount of interest.
Given: P = 1, 200, 000 Monthly payment = 31, 000

Solution
The total amount paid is given by
Total Amount = (31,000) (12 months) (5 years)
= Php1, 860,000

Thus, the total interest is the difference between the total amount paid
and the amount of the mortgage;
Total Interest = 1,860,000 – 1,200,000
= Php660, 000

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Example 3
If a house is sold for P3, 000,000 and the bank requires 20% down payment,
find the amount of the mortgage.
Solution.
Down payment = down payment rate x cash price
= 0.20(3,000,000) = 600,000
Amount of the Loan = cash price - down payment
= 3,000,000 – 600,000
= 2,400,000

The mortgage amount is Php2, 400,000.

Example 4
Ms Rosal bought a car. After paying the down payment, the amount of the
loan is P400, 000 with an interest rate of 9% compounded monthly. The term of the
loan is 3 years. How much is the monthly payment?
Solution.
𝑖 (12) 0.09
Given: P = 400,000 i(12) = 0.09 j= = = 0.0075 n = 36
12 12
Find: the regular payment R
𝑃
R= 1−(1+𝑗)−𝑛
𝑛
400,000
= 1−(1+0.0075)−36
0.0075
400,000
= 1−(1.0075)−36
0.0075
400,000
= 1−0.7641489606
0.0075
400,000
= 0.2358510394
0.0075
400,000
= 31.44680525
= 12, 719.89

The regular payment is Php12, 719.89

Outstanding Balance
Outstanding principal (or outstanding balance) refers to the amount of
debt still unpaid. We have two formulas for determining the outstanding
principal OBk at the end of any period k:
1− (1+𝑖)−(𝑛−𝑘) (1+𝑖)𝑘 −1
OBk =R [ 𝑖
] and OBk =P (1+i) k - R [ 𝑖
]

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 The first formula computes the outstanding principal as the resent
value of al payments still to be made (prospective method). You use this when
n is known.
The second computes the outstanding principal as the future value of
the debt at period k minus the future value of al payments at period k
(retrospective method). You use this if n is not known or n is not exact.

Example 5
A catering business took out a bank loan and plans to repay it through 5
annual amortization amounting to Php192, 819.34 each. If the bank charged an
interest of 9% compounded annually, find the outstanding principal after 3 rd year.
Solution:
Since interest is compounded annually, the required amount is OB 3.
From the problem, we know R = 192, 819.34, n = 5, j = 0.09, and m = 1.
1− (1+𝑖)−(𝑛−𝑘)
OBk = R [ ]
𝑖

1− 1.09−(5−3)
= 192, 819.34[ ]
0.09

1− 1.09−2
= 192, 819.34[ ]
0.09
1− 0.8416799933
= 192, 819.34[ ]
0.09
0.1583200067
= 192, 819.34[ ]
0.09

= 192, 819.34[1.759111186]
= Php339, 190.66

Example 6
A growing business moved to a new building to service a bigger client pool.
The building was acquired through a Php15 million bank loan with 12% interest
compounded monthly. If the agency amortizes the loan with monthly Php200, 000
payments, what is the outstanding balance in 5 years?
Solution:
Since interest is compounded annually, the outstanding balance in 5
years is OB60. We know that P = 15M, j = 0.12, and R = 200, 000. But we do
not know n. Hence, we will use the retrospective method:

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 (1+𝑖)𝑘 −1
OBk =P (1+i) k - R [ ]
𝑖

1.0160 −1
= 15, 000,000(1.01) 60 – 200,000 [ 0.01
]
0.8166966986
= 15, 000,000(1.816696699) – 200,000 [ ]
0.01
163339.3397
= 15, 000,000(1.816696699) – [ ]
0.01

= 27250450.49 – 16333933.97
= Php10, 916,516.52
Example 7
Mr Baldonado is considering to pay his outstanding balance after 6 years of
payment. The original amount of the loan is P500, 000 payable annually in 10years.
If the interest rate is 10% per annum and the regular payment isP81, 372.70
annually, how much is the outstanding balance after the 6th payment?
Solution:
Given: P = 500, 000 R = 81, 372.70 j = 0.10 n = 10 k = 6
Find: outstanding balance after 6 payments (or present value of the
remaining 4 payments)
1− (1+𝑖)−(𝑛−𝑘)
OBk =R [ ]
𝑖

1− (1+0.10)−4
OB6 =81, 372.70 [ ]
0.10

1− (1.10)−4
=81, 372.70 [ ]
0.10
1− 0.6830134554
=81, 372.70 [ ]
0.10
0.3169865446
=81, 372.70 [ ]
0.10

=81, 372.70 [ 3.169865446]

= Php257, 940.51
The outstanding balance after the 6th payment is Php257, 940.51

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 What’s More?
ACTIVITY 2
Practice your skills: write your solution and answer. (Do it in your notebook)
1. A loan of P200, 000 is to be repaid in full after 3 years. If the interest rate is 8%
per annum. How much should be paid after 3 years?
2. Mr. Ramos is considering to pay his outstanding balance after 3 years of
payment. The original amount of the loan is P100, 000 payable annually in 5
years. If the interest rate is 10% per annum and the regular payment is P226,
379.75 annually, how much is the outstanding balance after the 3 rd payment?
Scoring Rubrics:
Level 4 3 2 1 0
Accuracy Complete Arrived at the Incomplete Attempted No
solution correct answer solution and to solve evidence of
with the but with did not arrive attempting
correct incomplete at the correct to show the
answer solution answer solution

What I Have Learned

Summary of Key Ideas:

Loan – is a debt provided by one entity (an individual or an to another entity at an
interest.
Amortization Method – method of paying loan (principal and interest)
on instalment basis, usually of equal amounts at regular intervals.
Mortgage – a loan, secured by a collateral, that the borrower is obliged to pay at
specified terms.
Chattel Mortgage – a mortgage on a movable property.
Collateral – assets used to secure the loan. It may be a real – estate or other
investments.
Outstanding Balance – any remaining debt a specified time
• A debt-repayment scheme wherein the original amount borrowed is repaid by
making equal payments periodically is called an amortization.
• Formula of amortization in getting R:
𝑃𝑖
R = 1−(1+𝑖)−𝑛
• Mortgage formula:
F = P (1 + j) n
• We have two formulas for determining the outstanding principal OBk at the
end of any period k:
1− (1+𝑖)−(𝑛−𝑘) (1+𝑖)𝑘 −1
OBk =R [ ] and OBk =P (1+i) k - R [ ]
𝑖 𝑖

16
 What I can do

Activity 3
Directions: Solve the following problems completely.
1. Mr. Sia got a Php1, 100, 000 mortgage. If the monthly payment is
Php33, 000 for five years, how much is the total interest?
2. Mr. Abaya got a Php700, 000 loan for the expansion of his business
payable monthly in 4 years. How much is the monthly amortization if the
interest rate is 12% compounded monthly?
Scoring Rubrics:

Level 4 3 2 1 0
Accuracy Complete Arrived at Incomplete Attempted No
solution the correct solution to solve evidence
with the answer and did of
correct but with not arrive attempting
answer incomplete at the to show
solution correct the
answer solution

Assessment

POST TEST
A. Fill in the blanks. Write your answer on your notebook.
1. A ________ is a loan, secured by collateral that the borrower is obliged to
pay at specified time.
2. _______ is a mortgage on a movable property.
3. A ______ is a mortgage with a fixed interest rate for its entire term.
4. The ______ is the lender in the mortgage.
5. The _____ is the borrower in a mortgage.

B. Choose the letter that corresponds to the correct answer.

1. A business loan of 800, 000 is to be repaid in the full after 2 years. What is
the amount to be paid if the effective rate of interest is 8%?
a. Php 933, 120 b. Php983, 140
c. Php1, 083,160 d. Php1, 524,180

17
2. For the purchase of a farm worth P2, 800, 000, the bank requires 30%
down payment, find the mortgaged amount.
a. Php 590, 000 b. Php598, 170
c. Php1, 960,000 d. Php2, 250,180

3. Mr. yuson obtained a 20-year mortgage for P2, 200,000. If his monthly
payment is P18, 500, how much is the total interest?
a. Php1, 590, 000 b. Php2, 240, 000
c. Php2, 160,000 d. Php2, 250, 000

4. A business loan of P650, 000 is to be settled by paying P29, 994.20

monthly in 2 years. If the interest rate is 10% converted monthly, how
much is the outstanding balance after 6 payments?
a. Php199, 428. 21 b. Php299, 428. 21
c. Php399, 428, 21 d. Php499, 428. 21

5. Ms. Sena got a P500, 000 loan to be repaid quarterly in 5 years. The
interest rate applied 10% convertible quarterly. The quarterly payment is
solved as P32, 073.56. How much is the outstanding balance after 2
years?
a. Php329, 003.03 b. Php229, 003. 21
c.Php129, 428. 21 d. Php29, 003. 21

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Oronce, Olando A. First Edition. “General Mathematics” 268 – 270. Quenzon
City: Rex Bookstore.

Lim, Yvette F, and Rizaldi C.Nocon. 2016. “Math for Engaged Leaning,
Senior High General Mathematics.” Quezon City: Sibs Publishing House
Inc.

Verzosa, Debbie Marie B. and Leo Andrei A. Crisologo, et al.2016. “Teaching

Guide for Senior High School General Mathematics” Quezon City:
Commission on Higher Education.

19