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Simple Interest

Instructor: Brian Roy C. Lopez

January 5, 2015

Instructor: Brian Roy C. Lopez

Simple Interest

Definition

Interest refers to the amount paid for the use of money or the

price paid for the use of credit

It also serves as a mechanism of imposing penalty to a borrower for

not paying a matured financial obligation at a specified time

Instructor: Brian Roy C. Lopez

Simple Interest

Definition

Lender or Creditor refers to the party lending money or extending

credit

Borrower or Debtor refers to the party using income from the

transaction

Instructor: Brian Roy C. Lopez

Simple Interest

Elements of Interest Computation

1

Principal

2

Interest Rate

3

Time

Instructor: Brian Roy C. Lopez

Simple Interest

Illustration

Example

On Mar 1, 2012 Jocelyn borrowed P5, 000, 000 from First

Commercial Bank at 8% interest, payable on Mar 1, 2014, to

finance the construction of her manufacturing plant.

Identify the principal amount, interest rate and the time

Instructor: Brian Roy C. Lopez

Simple Interest

Simple Interest Computation

Definition

Simple Interest refers to an interest that is computed only once

from the time the amount is borrowed until it is paid.

There is only one interest payment made during the entire period

of borrowing.

The formula to compute the simple interest is given by

I = PRT

where

I = interest

P = principal

R = rate

T = time

Instructor: Brian Roy C. Lopez

Simple Interest

Example

Find the simple interest of P200, 000 at 6% for 2 years and 6 mos.

Instructor: Brian Roy C. Lopez

Simple Interest

Example

On May 1, 2012 Hazel borrowed a sum of money from Community

Bank, payable for 2 years at 8% simple interest. She paid P6, 000

for the interest of her loan. Find how much was borrowed by Hazel

Instructor: Brian Roy C. Lopez

Simple Interest

Example

On July 1, 2012 Izzy deposited P400, 000 at Northern Bank. The

deposit earned simple interest of P96, 000 for 3 years. Compute

the rate of simple interest on depositor.

Instructor:...