1. Determining the Interest and the Amount

The formula for determining interest is given as:

I = Prt, where

I = interest

P = principal or the borrowed amount

r = interest rate

t = time or the duration of the loan/investment

Example 1:

Mr. Paulo Roque borrowed Php2,600 from Mr. X at an interest rate of 5%, what is the interest in 3 years? How much should Mr. Paulo Roque pay at the end of 3 years?

SOLUTION:

Given:

P = Php2,600

r = 5% or 0.05 (per year)

t= 3 years

I = ?

I = Prt

I = (2,600)(0.05)(3)

I = (2,600)(0.15)

I = Php390

Then, to find the total amount to be paid at the end of 3 years, the formula for computing it is

A = P + I, where

A = sum or total amount to be paid

P = principal

I = interest

Thus,

A = P + I

A = Php2,600 + Php390

A = Php2,990

Example 2:

How much interest will be charged if Dominic Daez borrows Php15,000 for 2 years at interest rate of 9%?

SOLUTION:

Given:

P = Php15,000

r = 9% or 0.09 (per year)

t = 2 years

I = ?

I = Prt

I = (15,000)(0.09)(2)

I = (15,000)(0.18)

I = Php2,700