SIMPLE

INTEREST
Prepared by:
Mr. Emmanuel Vincent S. Espino
Business Terms
Simple Interest – refers to
the amount of money paid
by a borrower to his/her
individual creditor, bank, or
any financing or lending
institution.
Rate of Interest – It is
the percentage amount
that the principal will be
subjected.
Principal – It is the
initial amount that will
be loaned or lent, or
borrowed. It is also
known as present
value.
Sum of Money – It is the
amount accumulated over a
period of time. It includes the
principal and the amount of
interest. This is also known as
total amount, future value or
maturity value.
Borrower – a person or
entity that has applied,
submitted requirements
and received money
from a lender.
Lender – is a person
or entity which
makes available
funds or money to
borrowers.
 Three factors in
determining the Simple
Interest on deposits or
charges against loans:
 Determining the Simple
Interest: (I)

The rate of interest given

by the bank or lender.
 Determining the Simple
Interest: (I)

The duration of time for

which the money is
borrowed or deposited.
Determining the Simple
Interest: (I)
The total amount of
money borrowed or
deposited.
Per definition, the
simple interest is:

Formula:
I = Prt
 Formula:
I = Prt
Where:
I – Simple interest or Amount of interest
P – Principal or Present Value
r – Rate of Interest (%)
t – Time (Number of years)
Examples
 1. A businessman invested his
money in an investment that gives
8 ½% simple interest rate per year.
If the duration of the investment
was 1 ¾ years, how much interest
will he receive for his 2 million
peso investment?

Simple Interest(I) – Php297 500

 2. Mr. De Castro borrowed
money from the bank in the
amount of Php260 000 with an
interest of 11 ½%. How much
would be the amount of interest
in 2 years and 3 months?

Simple Interest(I) – Php67 275

 3. Philip borrowed Php700 000 from
a bank. The bank charged Philip the
following rates: 12% for the first
Php500 000 and 14% for the rest of
the loan. How much should Philip pay
for after 21 months?
Simple Interest(I) – Php154 000
PRACTICE
1. 5 ¼% simple
rate interest of
Php125 350 for 3
¾ years.
2. 6 ½ % simple
rate interest of
Php653 225 for 2
years and 5
months.
3. 9 1/2 % simple
rate interest of
Php27 735 for 7
months.
4. Suppose an
investment of Php10
000 for 5 years earns
7% simple interest. Find
the simple interest
earned.
5. To furnish his new
condominium unit, Juana
borrowed Php125 000 at
3% interest for 11
months. How much
interest will she pay?