SENIOR HIGH SCHOOL

QUARTER 2
What I Need to Know

This lesson helps you understand thoroughly what is simple

interest and compound interest. It will let you decide correctly on
how and where to save. Nowadays savings is very important, it
is like saying “If you do not have savings you are out” and it will
make you analyze whether to save in simple or compound in
favor of you, as a borrower or investor
 Lesson 1 – Simple Interest
Lesson 2 – Compound Interest
After going through this lesson, you are expected to:
1. illustrate simple and compound interests; and
2. distinguish between simple and compound interests.
What I Know

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. What interest remains constant throughout the investment

term?
a. simple c. annuity due
b. compound d. ordinary annuity
2. It is an interest computed based on the principal amount.
a. simple c. annuity due
b. compound d. ordinary annuity
6. Which of the following statements is/are true?
I. Compound interest of a loan favors the borrower.
II. Simple interest remains constant throughout the investment term.
III. In compound interest, the interest from the previous year also earns interest.
a. I only c. II and III
b. I and II d. I and III
10. In the formula, I= Prt, what is r?
a. revenue c. repaid
b. real value d. rate of interest
11. It is the amount of money borrowed or invested on the origin date.
a. future value c. maturity value
b. principal value d. repayment value
12. A person (or institution) who invests the money or makes the funds available.
a. Lender c. Both a and b
b. Creditor d. None of the choices.

13. It refers to an interest that is computed based on the principal and interest
accumulated every conversion period.
a. simple c. annuity due
b. compound d. ordinary annuity
 Simple Interest
You know, it’s quite difficult to pursue our dreams, especially in some trying times
like what our country is experiencing on the COVID-19 pandemic. Dreaming is
just a dream the realization of it is the product of our perseverance, patience, and
determination. For now, continue your studies, develop your skills, and cultivate
your talents because those are your weapons in life.
I hope that you somehow encountered some math of investment terms like simple
interest, loans, savings, investments, maturity value, money, resources, and the
like. This lesson will help you understand simple interest. Different terminologies
about the simple interest that you can use for the succeeding lesson once you go
deeper on the problem solving about simple interest.
 What’s In

Match Me! Reveal Me!

Match the terminologies in

column B to its definition or
statement in column A.
Write your answer on the
blanks provided below the
trivia question inside the
box. Your answer should
reveal an important Filipino
value that everyone should
possess. Finally, answer the
guided questions that follow.
What’s New
What is It
4. Simple interest is the product of the principal, rate of interest, and time.
5. In ordinary interest, the interest is computed based on 365 days.
 Compound Interest

This lesson will lead you to understand another type of earning interest, the
compound interest. If you understand the simple interest in this module, lesson
2 will give you knowledge of how simple interest differs with compound interest.
This will lead you to compare your investment in the future from different options.
It will also help you to make wise decisions if you will apply for loans from a bank
to start your own business or if you need funds for emergency purposes. Being
financially literate is also a skill that will help you to be successful in money
matters and have a good life.
What’s In Match Me! Reveal Me, for the second time!
Match the terminologies in column B to its definition or statement in column A. Write your answer on
the blanks provided below the trivia question inside the box. Your answer should reveal one of the
products that we should be proud of as a Filipino. Finally, answer the guided questions that follow.
 What’s New

Be hospitable and helpful, please!

Read and analyze each item and write the word GENEROUS if your answer is
true and write HELPFUL if otherwise. It is hoped that these two words will remind
you of Filipino values, so whenever you see true kindness and good deeds be
generous to share it with others and be helpful if you see someone on difficult
(false) situation.
1. Simple interest is computed using the formula Is = Prt.
2. Compound interest is computed on the principal and also on the
accumulated past interests.
3. An amount of ₱10,000.00 will yield more interest if it is invested in a bank
that offers a simple interest of 10% annually than a bank that offers a 10%
compound interest annually if it will be invested for three years.
4. Compound interest works best over a short period of time.
5. A borrower or debtor prefers compound interest rather than simple interest.
6. In compound interest, the interest from the previous years also earns
interest.
7. It is better to deposit in a bank that offers simple interest than a bank that
offers compound interest.
Are you confident about your answer? Are you generous enough to share your
answer and help your classmates to answer each item correctly? Or do you think
you still need help from your classmates? If you are still in doubt, don’t worry,
the next discussion will give your ideas of the correct answer.
What is It

Compound interest (𝑰𝒄) is the interest computed on the principal and also on the accumulated past
interest, so compound interest is a way to earn money because you don’t just earn using your original
money, but also the interest you earned.
To give you a deeper concept of compound interest, reflect the following questions: Have you ever lent
money to someone like a friend, sibling, or relative? If so, would you let them pay more than or less
than or just equal to what you lent to them? Since you consider to help them, probably you will answer
just an equal amount is ok even though your money has been used for a period of time. But, I’m sure
some will answer that you should receive more than the amount they borrowed and no one will say
that you should receive less than the amount they borrowed. I know you have your own perspective in
life but let us see if compound interest will change your view in life regarding loans or borrowings,
savings, and investment.
Are you familiar with credit cards? We have what we called “Perma-Debt” which means a continuous
outstanding balance of a credit card where they pay the monthly minimum that fits in their budget to
lessen the burden of interest monthly but tries to add some debt again in the following month so the
debts never end. So why did I tell you this? If you are a debtor compound interest is not good for you.
Better yet pay your debt in full the soonest possible so that the burden of interest will not be on your
shoulder. Conversely, if you are an investor, compound interest is your best buddy and it is better to
invest in a long period of time for you to have a greater return of your investment through interest earned.
So, if you have the means or a way to save and invest early, you must consider it as soon as possible for
you to gain more money in the future. Now, that you already know how to solve simple interest. Study the
example below and compare this to the example given in Lesson 1. (Note: Same problem was given
here to compare the interest earned in simple and compound interests)
Example
Problem Solving: Due to COVID-19 pandemic Miss Dada a female resident of
Barangay May Pagkakaisa somewhere in Quezon Province thinks of a business
that can provide for her needs as well as the need of her neighbors so she can be
of help even in this trying time.
Having no money at hand she decided to borrow from a bank as the start-up
capital of ₱50,000.00 at 7% interest rate compounded annually and payable
within 5 years. Compute for the interest yield.
Solution.
 Find the maturity value and the compound interest if
P10,000 is compounded annually and the interest rate is 2%
in 5 years
Solution:

Given: P = 10,000 , r= 2% or 0.02 , t=5 years

Find: a. Maturity value F
b. Compound interest
Solution: F = P (1 + r )t
F = 10000(1 + 0.02)5
F = P11,o40.81

Ic = F – P = 11,040.81 – 10000 = P1040.81

Find the maturity value and interest if P50,000 is invested
at 5% compounded annually for 8 years.
Solution:

Given: P= P50,000 , r = 5% or 0.05 ,t = 8 years

Find : a. Maturity value
b. Compound interest rate
Solution:
Solution: F = P (1 + r )t
F = 50000(1 + 0.05)8
F = P73,872.77

Ic = F – P = 73,872.77 – 50000 = P23,872.77

 Suppose your Father deposited in your bank account
P10,000 at an annual interest rate of 0.5% compounded
yearly when you graduate from kindergarten and did not
get the amount until you finish Grade 12.How much will
you have in your bank account after 12 years.
Solution:

Given: P= P10,000 , r = 0.5% or 0.005 ,t =

12 years
Find : F
Solution:
Solution: F = P (1 + r )t
F = 10000(1 + 0.005)12
F = P10,616.78
What is the present value of P 50,000 due in 7 years if
money is worth 10% compounded annually?
Solution:
Given: F= P50,000 ,t=7years ,r = 10%
Find: P
P = P = F / (1+ r)t
P = 50,000 / (1 + 0.10)7
P = P25,657.91
 How much money should a man place in a time deposit in
a bank that pays 1.1 % compounded annually so that he
will have P200,000 after 6 years.
Solution:

Given: F= P200,000 ,t=6 years ,r = 1.1%

Find: P
P = P = F / (1+ r)t
P = 200,000 / (1 + 0.011)6
P =P187,293.65
Solve the ff. problems on compound interest.

1. What are the amounts of interest and maturity value of a loan

of P20,000 at 6% compounded interest for 3 years?
2. In order to have P50,000 in 5 years, how much should you
invest if the compound interest is 5%?
3. A savings account in a bank yields 0.25% compound interest
annually. Accumulate(find the future value) of P25000 for 4 years
in this savings account. How much interest will be gained?
4. In a certain bank .Angel invested P88,000 in a time deposit
that pays 0.5% compound interest in a year. How much will be
her money after
6 years. How much interest will she gain?
5. On the 7th birthday of her daughter. Angie deposited an
amount in a bank peso bond that pays 1.0% interest compounded
annually .How much should she deposit if she wanted to have
P100,000 on her daughter’s 18th birthday?
Compounding more than once a year