Simple interest and compound interest.pptx

it is about simple and compound interest

1. Simple interest and compound interest

2. TYPES OF INTEREST SIMPLE INTEREST- It is an interest in which only the original principal yields interest for the for the entire term of the loan wherein the principal and the present value is equal. COMPOUND INTEREST-It is an interest added to the principal at the end of a certain period of time after which the interest is computed on the principal. This means that the interest is computed on the principal and also the accumulated past interest.

3. SIMPLE INTEREST -defined as I= Prt Where, I= simple interest P= original amount (invested, loan, deposited, et.al) r= rate of interest (expressed in decimal) t= time (per year)

4. KEY TERMS lender or creditor – person or institution who invest the money or makes the funds available  Borrower or debtor- who owes the money or avails of the funds from the lender Origin or loan date – date on which money is received by the borrower Repayment date or maturity date- on the which the money borrowed or loan is to be completely repaid Time or term (t)- amount of time in years the money is borrowed or invested; length of time between origin and maturity dates Principal ( P)- amount of money borrowed or invested on the origin date Rate (r) annual rate, usually in percent, charged by the lender, rate of increase of the investment. Interest (I) amount paid or earned for the use of money.

5. EXAMPLE 1: Find the interest if Php 25,000 is invested at 5% interest rate for 3 years. Given: P= 25,000 r= 5% t=3 yrs Solution: I= Prt I=(25,000)(5%)(3) I=3,750.00 Therefore, the interest is Php 3,750

6. EXAMPLE 2: If Php 35,000 is deposited in an account paying 6.5% simple interest, how much will be in the account after 9 months. Given: P= 35,000 r= 6.5% t=9 months Solution: I= Prt I=(35,000)(6.5%)(9/12) I=(35,000)(0.065)(0.75) I= 1,706.25 F=P+I F=35,000+1,706.25 F=36,706.25 Therefore, the interest is Php 36,706.25

7. EXAMPLE 3: An interest of Php2,500 was earned for two years on an investment at 9%. How much was invested? Therefore, Php 13,888.89 was invested at 9%  

8. ACTIVITY: An interest of Php 10,000 was paid on a Php 50,000 simple interest loan at the end of 4 years. What was the rate of interest charged? How many years are needed to earn Php 26,250 if Php 75,000 is invested at 7%? A father of a college student applied for loan of Php 500,000 in a cooperative that charged him 8% simple interest. How much should he repay at the end of 5 years? What principal will accumulate to Php 200,000 in 3 years and 9 months at 7.5% simple interest?

9. GROUP ACTIVITY

10. COMPOUND INTEREST -defined as F= 𝐏(𝟏 + 𝒓 ) 𝒕 Where, F=final amount or maturity (future) value P= principal or present value (original amount) r= interest rate t= term or time in years I=F-P Where, F= Final amount or maturity (future) value P=principal or present value (original amount)