Podcast
Questions and Answers
What principal amount did Jenny borrow from Phil Bank?
What principal amount did Jenny borrow from Phil Bank?
How long did it take Jenny to pay off her loan?
How long did it take Jenny to pay off her loan?
What is the total amount Alex has to pay back after borrowing 10,000 for 2 months at 2% interest per month?
What is the total amount Alex has to pay back after borrowing 10,000 for 2 months at 2% interest per month?
What is the simple interest earned if a principal of 55,000 is invested at a 6% rate for 3 years?
What is the simple interest earned if a principal of 55,000 is invested at a 6% rate for 3 years?
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Using the formula I=PRT, what does 'R' represent?
Using the formula I=PRT, what does 'R' represent?
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What amount of interest did Jenny pay on her loan from Phil Bank?
What amount of interest did Jenny pay on her loan from Phil Bank?
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What calculation method is used to determine how long it took Jenny to repay her loan?
What calculation method is used to determine how long it took Jenny to repay her loan?
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If Alex borrowed 10,000 with a 2% monthly interest rate, what would be the interest for 1 month?
If Alex borrowed 10,000 with a 2% monthly interest rate, what would be the interest for 1 month?
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What is the decimal equivalent of 25%?
What is the decimal equivalent of 25%?
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Which party in a loan agreement expects to earn income from lending money?
Which party in a loan agreement expects to earn income from lending money?
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What is the role of interest in a financial transaction?
What is the role of interest in a financial transaction?
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How is the interest rate typically expressed?
How is the interest rate typically expressed?
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Which of the following is NOT an element of interest computation?
Which of the following is NOT an element of interest computation?
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What does the principal refer to in the context of loans and interest?
What does the principal refer to in the context of loans and interest?
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In the context of lending, who assumes future expenses as the cost of using borrowed money?
In the context of lending, who assumes future expenses as the cost of using borrowed money?
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Which statement best describes simple interest?
Which statement best describes simple interest?
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What is the formula used to compute simple interest?
What is the formula used to compute simple interest?
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If Ms. Jo borrowed Php1,000,000 at a rate of 10% for 1 year, what will her total interest be?
If Ms. Jo borrowed Php1,000,000 at a rate of 10% for 1 year, what will her total interest be?
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What does the maturity date refer to in a loan agreement?
What does the maturity date refer to in a loan agreement?
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What amount of simple interest did Alexa incur after borrowing Php600,000 at 9% for 1 year?
What amount of simple interest did Alexa incur after borrowing Php600,000 at 9% for 1 year?
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Which statement correctly describes simple interest?
Which statement correctly describes simple interest?
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How much interest would James have to pay after 3 years on a sum borrowed at a rate of 6% if the interest amount was Php 9,900?
How much interest would James have to pay after 3 years on a sum borrowed at a rate of 6% if the interest amount was Php 9,900?
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If the interest rate for a loan is expressed as a percent per year, what is the equivalent decimal for a rate of 7%?
If the interest rate for a loan is expressed as a percent per year, what is the equivalent decimal for a rate of 7%?
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What duration is considered if a person borrows money on March 1 and agrees to pay it back on March 1 of the following year?
What duration is considered if a person borrows money on March 1 and agrees to pay it back on March 1 of the following year?
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Study Notes
Introduction to Simple Interest
- Interest is the fee charged for using borrowed money.
- It is an expense for the borrower and income for the lender.
- Interest is calculated based on the principal amount, the interest rate, and the time period.
Parties Involved in Interest Payments
- Lender/Creditor: The party who provides the money or credit and expects to earn income from it.
- Borrower/Debtor: The party who uses the money or credit and expects future expenses for using it.
Elements of Interest Computation
- Principal: The initial amount of money borrowed or deposited.
- Interest Rate: The percentage charged for using the money over a certain period, expressed as a percentage per year unless otherwise stated.
- Time: The duration for which the money is borrowed, measured in years, months, or days.
Simple Interest Calculation
- Simple interest is calculated only on the principal amount.
- It is computed once from the initial borrowing date until the maturity date.
- Formula for simple interest: Interest (I) = Principal (P) x Rate (R) x Time (T)
Example 1.2: Calculating Simple Interest
- Alexa borrowed Php 600,000 at 9% interest for 1 year.
- Simple interest = (Php 600,000) x (0.09) x (1 year) = Php 54,000
Example 1.3: Calculating Principal Amount
- James borrowed an unknown amount at 6% interest for 3 years, paying Php 9,900 in interest.
- Principal = Interest / (Rate x Time) = Php 9,900 / (0.06 x 3 years) = Php 55,000
Example 1.4: Determining Time Period
- Jenny borrowed Php 90,000 at 9% interest and paid Php 16,200 in interest.
- Time = Interest / (Principal x Rate) = Php 16,200 / (Php 90,000 x 0.09) = 2 years
Example 1.5: Total Amount Payable
- Alex borrowed Php 10,000 at 2% monthly interest for 2 months.
- Simple interest = (Php 10,000) x (0.02) x (2 months) = Php 400
- Total amount payable = Principal + Interest = Php 10,000 + Php 400 = Php 10,400
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