INTEREST

Referred to as the sum paid for the

use of ones money.

FORMULA: I = Prt
I = the inerest
P = principal or face value
T = number of years, months, or
days for wich the money will be used
EXAMPLE:

1. Find the interest of P2,100 for 3 years

at 5%.
given: P = P2,100
r = 5%
t = 3 years

Solution: I = Prt
= P2,100 x .05 x 3
= P315
EXAMPLE:

2. How much interest is due on P1,500 at

6% per annum for 10 months?
given: P = P1,500
r = 6%
t = 10 months / 12 months

Solution: I = Prt
= P1,500 x .06 x (10/12)
= P75
Given time = days

Ordinary Interest = the interest is computed

for a given number of days divided by 360
360 is the actual or estimated number of days in a
year.

Exact Interest = interest is computed for a

given number of days divided by 365
365 is the exact number of days in a year

IF NOT GIVEN = USE ORDINARY INTEREST

EXAMPLE

3. Solve for the ORDINARY interest on

P1,480 for 110 days at 5%.
given: P = P1,480
r = 5%
t = 110 days / 360 days

Solution: Io = Prt
= P1,480 x .05 x (110/360)
= P22.61
EXAMPLE

4. Find the EXACT interest on P1,200 for

90 days at 4%.
given: P = P1,200
r = 4%
t = 90 days / 365 days

Solution: Ie = Prt
= P1,200 x .04 x (90/365)
= P11.85
RATE OF INTEREST

To solve for rate of interest if Principal,

Interest, and time is given

FORMULA: r = I / Pt
EXAMPLE

1. The interest on loan for P2,500 is

P60. If the loan is to be paid after
180 days, what is the rate of interest
charged
given: P = P2,500
I = P60
t = 180 days / 360 days
EXAMPLE

2. What is the rate interest charged on

a loan P3,400 if the interest paid is
P150 at the end of 8 months?
given: P = P3,400
I = P150
t = 8 months / 12 months
FINDING THE TIME

To solve for the time if Principal,

Interest, and rate are given.

FORMULA: t = I / Pr
EXAMPLE

1. The interest on a loan of P1,800 is

P20. If the rate of interest is 5%,
when is the loan due?
given: P = P1,800
I = P20
r = 5%
Methods of determining
dates
1. APPROXIMATE number of days
30 days a month
2. ACTUAL number of days
Actual number of days in a month
EXAMPLE

1. Solve for the APPROXIMATE number of

days from March 18, 2006 to Nov. 30,
2006

Solution:
Yearmonth day
2006 11 30
2006 3 18
8 12
APPROXIMATE NUMBER OF
DAYS

8 months
x 30 days
= 240 days
+ 12 days
= 252 approximate number of
days
2. Solve for the ACTUAL number of days
from March 18, 2006 to Nov. 30, 2006
March (31-18) ------------------ 13
Apr ------------------ 30
May ------------------ 31
Jun------------------ 30
Jul ------------------ 31
Aug ------------------ 31
Sep ------------------ 30
Oct ------------------ 31
Nov ------------------ 30
ACTUAL NO. OF DAYS 257
Find the ACTUAL and APPROXIMATE
number of days from Nov. 16, 2005 to
June 13, 2008
SOLUTION:
Nov.MONTH
16 2005 - Nov. 16 2007 APPROXIMATE
= 2 years
ACTUAL days
NOVEMBER 17 13 13
2007
DECEMBER 2007 31 30
JANUARY 2008 31 30
FEBRUARY 2008 28 30
MARCH 2008 31 30
APRIL 2008 30 30
MAY 2008 31 30
JUNE 13 2008 13 13
TOTAL 208 + (2 years x 206+(2years
365) =938 days x360) =926 days
SAMPLE
If P10,600 loan was made from Nov. 16,
2005 to June 13, 2008 with 7% interest
rate. How much is the interest using
approximate days?
FINAL AMOUNT

The amount to be paid including

principal and interest.

FORMULA: F = P + I
F = final amount
P = principal or face value
I = interest
1.EXAMPLE:
Find the interest of P2,100 for 3 years at
5%.
given: P = P2,100
r = 5%
t = 3 years

Solution: I = Prt
= P2,100 x .05 x 3
= P315
Final amount = P + I
= P2,100 + P315
= P2,415